Domestic gold hits a new record high on global uncertainties

 

The day began with one tael of SJC gold at the Saigon Gold, Silver and Gemstone joint stock company being purchased for VND56.5 million per tael and sold at VND58.10 million per tael, an increase of around VND1.05 - 1.2 million per tael from July 27 transactions.

Simultaneously, the DOJI Gold and Gems Group was asking for between VND56.35 million (buying) and 57.85 million (selling) per tael, representing rises of VND1 million and VND1.3 million, respectively.

Elsewhere, the Bao Tin Minh Chau gold firm at 10:16am listed its prices for the precious metal at VND56.3 million and VND58 million, respectively, for buying and selling. 

The fluctuations occurring in domestic gold prices can be attributable to the impact of the global gold market which saw gold prices sharply rise by US$36.1 to US$1,977.2 per ounce during the July 28 opening session.

“The momentum we are currently seeing suggests that the rally will persist, so gold may already climb to the US$2,000 mark in the next few days, though profit-taking would then likely ensue,” said Carsten Fritsch, analyst for Commerzbank.

This sudden surge in prices could mark a challenging period for some investors with a correction likely in the near future, although a significant price fallback is looking very unlikely, Fritsch noted.

“The fact that the rise in the gold price has been hardly driven by speculation at all argues against any excessive correction. Net long positions held by speculative financial investors increased only slightly in the last reporting week, and still remain significantly short of their early-March level,” he said.

The major driver behind this unprecedented gold rally can be considered to be the US dollar’s weakness and a fear of dollar debasement.

“One key driving force behind the upswing is the weaker US dollar, which on a trade-weighted basis has depreciated to its lowest level in almost two years,” Fritsch wrote on July 27.

In addition, rising trade tensions between the United States and China, a sharp rise in money supply as a result of recent stimuli packages, and negative interest rates, are all combining to create a positive macroenvironment for the yellow metal.

Gold therefore set a new record over the last weekend as prices surpassed US$1,920 per ounce, with the previous all-time high set in 2011. However, this momentum may not stop until US$4,000 an ounce is reached, according to Frank Holmes, CEO of US Global Investors, who based his prediction on the effects that monetary stimulus packages had on gold during the previous global recession.

According to prediction made on Kitco.com, the world’s gold prices are forecast to reach US$1,915 per ounce on September 1, US$2,085 on November 1, and US$2,257 per ounce on January 1, 2021.