Gold price increases "vertically", experts advise caution

Since the beginning of October, the price of SJC gold bars has increased by 4 million VND/tael, up to 89 million VND/tael, while the price of gold rings has also reached a new peak, increasing by 1.4 million VND/tael. What do you think is the reason for the increase?

On October 21-22, the world gold price reached 2,732 USD/oz. Converted to Vietnamese Dong, it is about 83.3 million VND/tael. Because the domestic gold price depends entirely on the world gold price, it is understandable that the domestic gold price, gold bar price, and gold ring price increase according to the world gold price.

Associate Professor, Dr. Dinh Trong Thinh.

World gold prices increased due to the following reasons:

The first is the conflict between Russia and Ukraine. This is a very important issue because this conflict disrupts the world's supply chain, causing the price of raw materials for production and business to increase. When production is difficult, people buy and reserve a lot of gold.

In addition, the conflict between these two countries also significantly reduced the gold supply because Russia is the world's largest gold producer. When the conflict occurred, Russia was surrounded and embargoed, selling gold to the world was difficult and the supply was inevitably reduced.

Second , when the value of the USD decreased after the US Federal Reserve (FED) raised the operating interest rate by 0.5%, it also helped the price of gold increase. In recent times, inflation has decreased, so the US government and many countries in the world have implemented a tight monetary policy, raising interest rates of their currencies. When raising interest rates, it means that the currency loses value compared to other currencies and especially loses value compared to gold. The increase in interest rates makes speculators and investors expect gold to increase in price compared to the USD.

Through previous research, I found that there were 3 times when the USD interest rate increased, causing the expectation of gold price to increase very strongly compared to the USD, increasing by at least 22%. The highest time, the price of gold increased by 32% compared to the USD. At this time, the expectation of gold price increase is even greater. Especially in the context of the Russia-Ukraine conflict, Western countries blockaded the Russian economy , not allowing Russia to participate in SWIFT. Therefore, many countries in the world, including Russia, realized that holding the USD in particular and strong currencies in the world such as the British pound and the Euro is highly risky. Therefore, the central banks of many countries in the world, instead of holding foreign exchange reserves in USD, turned to holding gold reserves. This increased the demand for gold, causing the price of gold to increase accordingly.

During the period from last year to this year, Asian people, especially China, India, and Vietnam, have increased their gold purchases (including gold bars and gold rings). This has also increased the world gold price.

Third , one of the recent factors is the conflict between Israel and Iran and its proxy forces in the Middle East, which also makes investors worried and seek gold as a safe haven asset.

All of the above factors have pushed gold prices up very strongly. Since the beginning of 2023, the world gold price has increased by more than 20%. Therefore, when the world gold price increases, domestic gold cannot stand still because domestic gold production is insignificant, mainly imported from the world.

Some international experts believe that the growing “fear of missing out” (FOMO) mentality in the gold market could be a sign of a “bubble”. In your opinion, can the price of gold rings create a “bubble” like the price of gold bars before?

Currently, the gap between the price of gold bars or gold rings and the world gold price is short, about 3-4 million VND/tael. That is normal.

In fact, this is not a bubble because it still closely follows the world gold price. The gold rally has just started and retail investors have not participated much in the market. I think FOMO will appear when the price approaches the $ 3,000 / ounce mark.

With the current increase in gold prices, do you think people and investors should invest in gold?

According to forecasts, gold prices will continue to increase in the coming time due to the US government raising interest rates. Thus, the expectation of the USD losing value compared to gold prices still happens, not to mention the outbreak of conflicts around the world and the possibility of gold prices increasing is still very large.

People should be careful before buying and selling gold. Photo: Phuong Cuc

Gold prices may continue to increase and this increase may last from now until the end of 2024, possibly at the mark of 2,800 USD/oz, even 2,850 USD/oz.

Therefore, the story of buying or holding gold depends on the forecast, financial capacity and needs of each person.

For investors who are quick, flexible, and buy to “surf” in times of turmoil like this, they will see more profit. However, the current gold price is very high and fluctuates unpredictably. Therefore, if people do not have enough knowledge and experience to invest heavily, they should be careful and think carefully before buying and selling gold.

On the other hand, in the context of Vietnam's relatively good economic development, the ability to invest in other fields is also very good, especially investing in the stock market, because when production grows, stocks increase, the Vietnamese currency stabilizes... Therefore, investors should compare and consider investing in different fields to bring about the highest efficiency in investment.

Source: https://congthuong.vn/gia-vang-tang-dung-dung-chuyen-gia-khuyen-hay-can-trong-354135.html