Gold soars past $2,400/ounce

At the beginning of the trading session on July 11 (night of July 11, Vietnam time), the spot gold price on the New York floor in the US jumped by about 30 USD to 2,410 USD/ounce after the US announced the consumer price index in June was lower than expected.

This information, along with the new policy stance that US Federal Reserve Chairman Jerome Powell shared before the US House of Representatives in the previous session, immediately made investors bet on a nearly 90% chance that the US Central Bank would cut interest rates in September.

According to the US Bureau of Labor Statistics, the consumer price index (CPI) in June decreased 0.1% after being flat in May. This is positive news for the US economy and exceeded the 0.1% increase expected by economists.

Over the past 12 months, US inflation was at 3%, lower than the expected 3.1% and lower than the 3.3% recorded in May. Core CPI (excluding energy and food prices) increased only 0.1%, compared with the expected increase of 0.2%.

Previously, gold had a strong increase in the Asian market after Chairman Powell unexpectedly announced that the Fed would lower interest rates without inflation reaching the 2% target.

This is a significant change in the Fed's policy stance.

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Domestic gold ring prices increase following world prices. Photo: HH

Previously, Mr. Powell had always been persistent in his stance of pulling inflation back to the 2% target and believed that it could be achieved.

However, things have changed quite a bit. The US economy has recently started to send out many negative signals - something that many Fed officials and market analysts are worried about. The May employment figures were revised down, and the unemployment rate increased in June.

During a hearing before the US House Financial Services Committee on July 10, Fed Chairman Powell said the Fed would not wait until inflation fell to the 2% target before cutting interest rates. Because, according to him, if he waited that long, inflation could fall and fall below 2% - which is undesirable.

Having said that, the issue that worries Mr. Powell and many Fed officials the most is the delayed policy impacts on the US economy. If interest rates are kept at the current high level (5.25-5.5%/year), the US economy could fall into recession. At that time, the damage would be huge.

This is also an issue that has been mentioned by economists for a long time. However, the Fed has had a lot of difficulty determining the right time to change or reverse monetary policy.

Mr. Powell's statement this time is clearer than ever. The Fed can accept inflation at a higher level than the 2% target established over the past decades.

America accepts the new reality, will gold price go up to 3,000 USD?

The reason for the change in the Fed's view on inflation targets is that the US and world economies have changed a lot after the Covid-19 pandemic and recent geopolitical conflicts in Ukraine, the Red Sea, the Middle East...

Many countries around the world are having to live with rising consumer prices. Meanwhile, economic growth is slowing.

The world today tends to be fragmented. Global supply chains are also broken and cracked. Countries tend to tax many types of goods to protect domestic production, instead of promoting free trade.

Recently, central banks of many countries have decided to lower interest rates and pump more money into the market to support economic growth in the context of high inflation, including the European Central Bank (ECB), the Central Bank of Canada, Sweden and Switzerland...

ECB officials also raised their forecast for average inflation in 2024 from 2.3% to 2.5%. For 2025, inflation was raised from 2% to 2.2%. In 2026, inflation is forecast at 2.9%.

In the US, if there are no major changes, the possibility of the Fed cutting interest rates at its meeting on September 18 is very high. The Fed may also cut interest rates twice this year. The USD is expected to fall, thereby pushing up gold prices.

As of 8:25 p.m. on July 11 (Vietnam time), the DXY index - measuring the greenback's fluctuations against six major currencies - fell 0.8% from the previous session to 104.2 points. Gold price rose to 2,410 USD/ounce (equivalent to 74.7 million VND/tael).

In the long term, the Fed is expected to cut interest rates many times, possibly up to 10 times. The USD in the future will also be under pressure from efforts to reduce the role of this currency from China, Russia and many other countries in the BRICS group.

The falling US dollar will push gold prices up. Gold is also supported by increased demand for reserves of this metal from central banks in many countries.

The Fed’s interest rate cut is just one factor affecting gold. From now until the end of the year, the world has many important events, including the US presidential election in November. Mr. Trump, Mr. Biden or someone else in the new term is also expected to affect the financial and commodity markets. More money can be pumped out.

Many forecast that gold will reach $2,500/ounce by the end of this year. Goldman Sachs believes that gold will reach $3,000/ounce (equivalent to VND93 million/tael) next year when the Fed enters a monetary easing cycle.

Domestically, the price of SJC gold bars has remained stable at nearly VND77 million/tael (selling price) for about 31 consecutive sessions. The price of gold rings has risen to VND76.25 million/tael (selling price), only about VND750,000/tael lower than the price of SJC gold bars. Compared to the beginning of the year, gold rings have increased by about VND13-14 million/tael.
The world gold price has increased dramatically, how much will plain rings go up? The world gold price increased sharply last week, heading towards the threshold of 2,400 USD/ounce. Plain gold rings increased accordingly, almost as high as the price of SJC gold bars. What will be the trend of international gold and plain rings in the coming time?