Both domestic and global gold prices have been spiraling since last week’s general sell-off in equity markets and will likely continue to do so for some time. The downward trend is attributed to stock market uncertainty and fears of deflation.
Global gold prices settled at US$653.90 an ounce this morning, a slight decrease emulating trends in the world market, especially in China where stock market investors are dumping their gold to mobilize capital to compensate for that market’s recent losses.
The central bank of China on Saturday said it was raising interest rates for the third time in less than a year to put a lid on credit and investment and keep the world's fourth-largest economy on an even keel. The annual consumer inflation rate in China increased to 2.7% in February from 2.2% in January.
However, in the domestic market, stock-market experts predict gold prices are set to increase gradually for a sustained period of time when investors, who have made billions of dong on the stock market, are now moving their new found wealth into gold and real estate.
Last week, gold was traded in domestic markets at around VND12.58 – 12.70 million per tael and purchasing power was slightly higher than the previous week.
In the global market, the long-term prognosis remains bright with many experts believing that prices will exceed the US$695 per ounce resistance level in the next two or three months. Prices may then exceed US$700, take a sizeable fall (perhaps due to deflation fears) and then resume its secular bull market.
With gold exceeding some key resistance levels before the recent correction, it is now well positioned to move much higher once this consolidation is over. The correction only put a short-term dent on the upward trend, allowing buyers to enter the market below the US$650 price before the market reaches US$700 and beyond.
The State Bank of Viet Nam today quoted an inter-bank exchange rate of VND16,090 for one dollar.