The way of gold: unpredictable

There are many factors that make it difficult to predict the rise / fall of gold price. Photo: H.Diu

Unpredictable events

In the world market, from early this year, gold price is around 1,300-1,360 USD/ounce. In domestic market, SJC gold price also fluctuated around 36.6-37 million VND/tael (buy - sell). There is no big difference compared to world gold prices but at some moments, the gold price in the domestic market increased/ decreased contrary to the gold price in the world. Moreover, domestic gold price tends to unpredictably rise and fall for a time, but only a few weeks, and even on some days gold prices have fallen unevenly among gold companies.

The above events show that gold (the traditional channel of "asset shelter") price movements do not have a strong impact that affect the investors’ psychology. This is quite similar to the price of gold in 2017. According to the State Bank of Vietnam (SBV), the gold price in 2017 fluctuated in a narrow margin, without the appearance of the gold-piece “fever”. However, experts stated that in 2018, the gold market has been affected by many factors, so it cannot "stand still".

If the domestic economic situation is more favorable with the stable growth of the macro economy, the financial and political market in the world will have significant changes. Typically, the imposition of US taxes on Chinese goods and the trade “retaliation” from China will affect the strength and weakness of the USD, causing the fact that investors will tend to invest in gold. In addition, concerns about the political tensions of European nations will also be a positive impact on the gold price. Therefore, Kitco News' weekly gold price survey showed that in the first week of April, 57% said that gold price will rise next week, only 29% agreed that the price will be unchanged during the week.

However, the most important factor affecting the gold price is the evolution of the dollar. The news that the Federal Reserve System (FED) may continue to raise interest rates to control inflation has left investors no longer concerned about the weakness of dollar. In early April, 2018, the USD Index, which measures the strength of the US dollar against six other foreign currencies, has risen slightly and tended to rebound to more than 90.1 points, despite concerns about US-China trade disputes. In addition, the gold price is also affected by the stock market, the rise/ decline of the digital currency. These are unpredictable developments to assess the impact on the gold price.

Difficult to make a wave

Although the situation at present and in the near future is unpredictable, in the long term and for the whole of 2018, experts said that gold price will increase, slightly or sharply.

Standard Chartered Bank Vietnam's experts set the expectation that the world gold price will increase in a limited way in 2018. In addition, with the fact that the market focuses on rising interest rates in 2018, the gold price and real interest rates will re-establish a proportional relationship. Therefore, gold may be stable at a low level in the range of 1,250-1,375 USD/ounce. The experts also said that gold is less considered as a safe asset because it has been sold-off recently, which may be due to concerns about rising interest rates, causing detriment to gold.

With the same opinion, Dr. Nguyen Duc Do, Deputy head of the Institute of Economics and Finance, Academy of Finance, said that although it is difficult to predict the gold price, the fluctuation of the world gold price will be linked to the domestic gold price, but it will not have a strong impact. The cause of this phenomenon is that the State Bank of Vietnam has policies to control the market, strategies to reduce “goldenization” sharply, low inflation, stable exchange rate,... These policies and strategies make the volume of gold trading to be not as big as before, people no longer buy and sell gold much, which in turn does not affect significantly the gold price.

In addition, in the optimistic view, experts said that the fluctuations of gold price around 100 USD/ounce is not large and not attractive enough for investors, especially traders. Therefore, with the current gold price, experts only offer buying advice to customers for long-term hoarding.

In general, no matter what the gold price, investors, gold buyers should be cautious, avoid the “crowd” psychology, such as the shooting up of gold price in the God of Wealth Day in the early days of this year. Along with that, the State Bank of Vietnam always affirms that they will perform well, the role of state management for the gold market, preventing speculation, price setting, which causes instability in the gold and foreign currency markets; converting a part of the gold capital into a resource for socio-economic development.