Should you buy gold when the price drops sharply?

Experts say the recent sharp drop in gold prices comes from the shift in investment capital flows, expectations about US economic growth and the adjustment trend after strong price increases.

World gold prices have been on a sharp downward trend recently. Photo: Bloomberg.

In the two trading sessions of November 25-26, the domestic price of SJC gold bars and gold rings recorded a decrease of nearly VND3 million/tael, also the sharpest decrease in the past month. Although it recovered in the session of November 27, this slight increase could not make up for the previous decrease.

In the international market, the world spot gold price also slid in the previous session.

Assessing this fluctuation, Ms. Nguyen Thi Thanh Hoa, gold analyst and personal financial planner at FIDT Investment Consulting and Asset Management Company, said that there are many reasons that have caused the sharp decrease in world and domestic gold prices.

Reasons for the sharp drop in gold prices

Ms. Hoa pointed out that the domestic gold price is still fluctuating in the same direction as the world gold price. Therefore, the decrease in the domestic gold price is largely due to the influence of the sharp decrease in the world gold price.

Since the beginning of November, the world spot gold price has fallen more than 250 USD /ounce, equivalent to a net decrease of nearly 10%. This is also the sharpest net decrease of precious metals in the past 3 years.

World gold price decrease comes from 5 main reasons.

One is the shift in investment flows. The US financial markets have become more active as the short trading week for the Thanksgiving holiday begins. Investors are gradually moving away from safe-haven assets such as gold and shifting to risky assets such as stocks, thanks to positive signals from the US economy.

President-elect Donald Trump’s appointment of Scott Bessent as US Treasury Secretary has boosted confidence in financial stability in the world’s largest economy, reducing gold’s appeal as a hedge against risk.

The second reason is that investors are becoming more optimistic about the global geopolitical situation. Reports indicate that Israel and Hezbollah are moving closer to a ceasefire agreement, easing tensions in the Middle East. Gold, traditionally a safe haven in times of uncertainty, is seeing its demand fall on the prospect of peace.

The third reason is the US election results and economic growth prospects. In particular, the overwhelming victory of the Republican Party has reinforced the relative stability in the US market. This increases investor confidence in risky assets and reduces dependence on gold.

The US Federal Reserve's monetary policy is also an important factor in weakening gold prices. The minutes of the Fed's November meeting and economic data show that the Fed may maintain the current interest rate level in the near future. This increases the opportunity cost of holding gold, making gold less attractive.

Finally, the recent decline in gold prices also comes from the correction after each strong increase. In the previous week, the world gold price increased by nearly 6% when Russia-Ukraine tensions escalated. This was also the highest increase since March 2023.

Ms. Hoa said that in addition to the impact of world gold prices, there are also two factors that have caused domestic gold prices to decrease recently.

Firstly, the gap between international and domestic gold prices has narrowed significantly after the intervention measures of the State Bank of Vietnam (SBV), from more than VND20 million/tael in June to VND2-4 million/tael currently.

The second factor to consider is the supply and gold regulation policy of the management agency. Currently, the domestic gold market is still strictly controlled with limited supply. However, the State Bank has implemented some more flexible policies to support market regulation, helping gold prices follow world developments more closely.

Should I buy or sell gold?

According to Ms. Nguyen Thi Thanh Hoa, in the short term (from now until the end of the year), world gold prices may record slight fluctuations due to the influence of factors such as the Fed's monetary policy and traditional gold demand in India and China during the New Year.

In Vietnam, the market is in wedding season, the demand for gold increases, so it will also affect the price of this item.

Vietnam's gold market enters peak wedding season at the end of the year. Photo: Khuong Nguyen.

In the long term (until the second quarter of 2025), gold prices are forecast to remain in an uptrend, but there is not as much room for growth as other assets.

“If you have a long-term plan to store gold to protect your assets against inflation and economic instability, investors can buy regularly, spread out each month when they have extra money. If you only intend to buy gold for speculation and profit, this is not a suitable asset,” the expert recommended.

The reason is that macroeconomic factors fluctuate and the gap between domestic buying and selling prices remains high.

Between SJC gold bars and gold rings, in the current period, investors should prioritize choosing gold rings.

Gold expert and personal financial planner Nguyen Thi Thanh Hoa

On the contrary, investors can consider taking profits from gold when the economic situation shows signs of improvement in the second half of 2025.

Regarding the proportion of gold in personal asset portfolio, Ms. Hoa recommends that this asset should only account for 5-10% of total assets to diversify and minimize risks.

“Between gold bars and gold rings, in the current period, investors should prioritize choosing gold rings because the price of this item fluctuates more closely with the world gold price. While SJC gold bars are also affected by world prices, they are also affected by the management policy of the State Bank,” the gold expert of FIDT recommended.

With the goal of long-term accumulation, according to Ms. Hoa, the timing of buying gold is not too important, you can apply the method of buying regularly and periodically (monthly) instead of waiting for the lowest price to avoid FOMO. However, investors need to clearly define the purpose when buying gold.

"Because gold is a safe haven asset, it protects the value of money in the long term, not a quick-profit investment tool. Mistaking this purpose can easily lead to ill-considered buying and selling decisions, especially when the market is volatile," the expert emphasized.

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