Editor’s Note
Gold prices have retreated from recent record highs as investors take profits and the U.S. dollar strengthens. This article examines the factors behind the pullback and the market’s current dynamics.
Amid a strong US dollar and profit-taking by investors after the market hit record highs, international gold prices have fallen to their lowest level in two weeks.
As gold prices surged, approaching the historic high of $3,000 per ounce, the market entered overbought territory, increasing the risk of short-term selling pressure. Increased safe-haven demand pushed gold prices to $2,965 per ounce early this week, marking the 11th record high.
According to the World and Vietnam Newspaper, as of 8:45 PM on February 28 (Hanoi time), the world gold price listed on the Kitco electronic exchange…
The price fell to $2,857.30 per ounce, a sharp drop of $20.2 per ounce compared to the previous trading day.
The world gold price has fallen about 2.5% from the all-time high recorded earlier this week. The market is under downward pressure as investors take profits. On February 24, gold prices also fell by nearly $40. In total, compared to the peak of $2,956 per ounce recorded earlier this week, the world gold price has plummeted by $94 per ounce, equivalent to 2.92 million VND per tael. Another reason for the drop in gold prices is the strength of the US dollar. The dollar index rose 0.7%, making gold more expensive for buyers using other currencies.
Although gold prices have fallen significantly below $2,900 per ounce, some market analysts say the precious metal’s price is still acting as a solid support level. Rising inflationary pressures and confusion surrounding a potential global trade war have increased the risk of problems in the economic policies of governments and central banks, negatively impacting global economic activity.
Domestic gold prices have followed the downtrend in the world market, but the pace of decline has slowed somewhat. A notable point in the domestic market is that the difference between buying and selling prices has narrowed significantly to less than 1 million VND, and the price of 9999 purity gold rings has become almost similar to gold bar prices.
According to analysts, physical gold prices always lag behind world gold prices. Therefore, if the world gold price continues its downward trend in the coming days, there is a possibility of a sharp drop in domestic gold prices next week.
SJC gold bar prices continued to fall on the last day of February (February 28), with many major brands showing a corresponding decline.
Saigon Jewelry Company (SJC), Phu Nhuan Jewelry Company (PNJ), and Doji Group quoted gold prices at 88.9 – 90.9 million VND per tael (buying price – selling price).
In trading on February 28, the price of 9999 purity gold rings closed with a slight decrease of about 100,000 VND per tael. SJC maintained plain gold ring prices at 90 – 90.9 million VND per tael, Doji at 90.1 – 91.2 million VND, PNJ at 90 – 90.9 million VND, and Bao Tin Minh Chau at 89.95 – 91.4 million VND per tael.
In a recent interview with Kitco News, Nitesh Shah, Director of European Commodities and Macroeconomic Research at WisdomTree, mentioned that according to his model, gold prices are overvalued by about 15%. However, he immediately added that the current model is less persuasive because its core factors have been replaced by more dynamic elements. Therefore, his gold overvaluation analysis is only about 65% accurate in reflecting current price movements.
One of the most difficult factors to measure affecting the market today is geopolitical instability. While the US Federal Reserve (Fed) has shifted to a neutral monetary policy stance amid still-high inflation risks, he expects gold prices to continue their upward trend as geopolitical turmoil intensifies.
With both Canada and Mexico announcing retaliatory tariffs on US products, these tariffs are expected to trigger a trade war.
Economists have warned investors that a global trade war could increase inflationary pressures and weaken economic activity. Analyst Shah said, “If a recession occurs alongside inflation, it could be a major positive catalyst for gold prices.”
Meanwhile, WisdomTree’s Director of European Commodities and Macroeconomic Research stated that robust demand from China and central bank purchases will support the long-term upward trend in gold prices. Although rising gold prices are affecting physical demand, China’s current demand is much more resilient compared to other major trading markets.
Considering central bank demand for gold, analyst Shah pointed out that official foreign exchange reserves are at a significantly lower level compared to the past. He mentioned that China’s gold holdings account for only about 5% of its total foreign exchange reserves, calling it “a very small amount” and adding, “Central banks may have no choice but to purchase more gold.”