Domestic gold price increased sharply… 17 times higher than world gold price
The General Statistics Office (GSO) has just released the Socio-Economic Situation Report for May and the first 5 months of 2023. One of the notable data is that domestic gold prices have increased at a much higher rate than world gold prices.
According to GSO, domestic gold prices fluctuate in the same direction as world gold prices. As of May 25, 2023, the average world gold price was at 2,005.44 USD/ounce, up 0.06% compared to April 2023 due to concerns about financial system instability and signs of economic recession.
In addition, world gold prices increased sharply after the US Federal Reserve (FED) decided to raise interest rates for the 10th consecutive time on May 3, 2023, increasing the base interest rate by 0.25 percentage points to 5% - 5.25%, the highest since the summer of 2007.
Domestically, the gold price index in May 2023 increased by 1.02% over the previous month; increased by 3.97% over December 2022; increased by 0.44% over the same period last year; the average for the first 5 months of 2023 increased by 0.62%.
In May, domestic gold prices increased 17 times faster than world gold prices, making SJC gold increasingly expensive. Illustrative photo
However, after GSO's calculation time, the world gold price suddenly plummeted and moved away from the important milestone of 2,000 USD/ounce.
In the early morning of May 29, the world gold price in the Asian market was trading at 1,945.5 USD/ounce, down 59.94 USD/ounce, equivalent to 3% compared to May 25. At 1,945.5 USD/ounce, the converted price of SJC gold reached about 55.05 million VND/tael.
Meanwhile, the price of gold in the domestic market has a much slower decline with a loss of only about 66.45 million VND/tael - 66.98 million VND/tael, almost unchanged compared to May 25; the price of Thang Long dragon gold decreased by 110,000 VND/tael, equivalent to 0.2% to 55.77 million VND/tael - 56.67 million VND/tael.
It can be seen that when on the rise, the domestic gold price increases 17 times faster than the world gold price. But when on the decline, the world gold price decreases 15 times faster than the world price. This causes the difference between the two prices to be pushed up very high.
Currently, SJC gold price is about 12 million VND/tael more expensive than world gold price, non-SJC gold price is about 1.62 million VND/tael more expensive than world gold price.
At many other units, the price of SJC gold also did not fluctuate much despite the sharp decrease in world gold prices. At Phu Nhuan Jewelry Company - PNJ and Saigon Jewelry Company - SCJ, the price of SJC gold was listed at 66.40 million VND/tael - 67 million VND/tael. The price of SJC gold at Doji Group was traded at: 66.35 million VND/tael - 66.95 million VND/tael.
Gold price at risk of "breaking" the 1,900 USD/ounce mark
Gold is down $35 for the week, with June Comex gold futures last trading at $1,945.80 an ounce. Despite the sell-off, gold is still up more than 6% year to date.
Bart Melek, global head of commodity strategy at TD Securities, told Kitco News that macro data was the main driver influencing gold heading into the weekend.
“Durable goods, personal spending and PCE inflation measures all beat expectations,” Melek said. “Not only did inflation not decline, the Federal Reserve’s preferred inflation measure — the core PCE price index — rose to 4.7% in April.”
World gold prices are at risk of "breaking" the 1,900 USD/ounce mark. Illustrative photo
Inflation near 5% is too high for the Fed to justify a pause in June and the market is pricing that in. The latest market expectations show a 60% chance of a rate hike at the June 13-14 meeting, Gainesville Coins precious metals expert Everett Millman told Kitco News.
On top of that, the US dollar has done well, and gold has responded with a decline. “We think gold prices are likely to decline for much of the quarter and possibly into early Q3,” Melek said. “The market has misjudged the Fed’s intentions.”
With the Fed focused on inflation, there is little room for central bank influence ahead of its June meeting. Millman added that the dramatic debt ceiling debate is something to watch closely as any downgrade to the US credit rating would trigger safe-haven flows into gold.
Meanwhile, negotiations to raise the U.S. government's $31.4 trillion debt ceiling before June 1 hit a snag on Friday. Earlier, Democratic and Republican negotiators were close to a deal to raise the debt ceiling for two years while limiting some spending.
Millman said the next support level for gold is $1,940 an ounce. Below that, investors should watch $1,915 and $1,900 an ounce.
Analysts do not rule out a drop to $1,900. “The company’s support level is around $1,900-$1,896/ounce,” Melek said.
Frank Cholly, senior market strategist at RJO Futures, told Kitco News that it is too early to call gold bottoming even though the precious metal has fallen more than $125 since testing record highs a few weeks ago.
“The market is telling us that we’re going to see another rate hike in June and maybe one in July. Gold doesn’t like that,” Cholly said. “Somewhere in the $1,950-$1,925 range on the August futures contract, traders will find value and the market will form a base before moving higher.”
Source
Comment (0)