Vang SJC

Yesterday (11/6), gold went down after 3 consecutive days of gains, as the US announced positive data, enhancing possible Fed’s rate hike. Gold prices have slipped to $ 1,175.61 at / ounce, then closed at $ 1,181.64 / ounce, down 0.4% compared with the opening price ($ 1,186.14 / ounce).

Currently, at 3:40 pm GMT + 7, the price of gold is at $ 1,180.18 / ounce.

  • Today, most likely gold will turn up, under the influence of some factors:
    Regarding Greece: Yesterday, the IMF continued to give their views at the meeting to discuss Greece’s debt crisis took place in Brussels. However, ultimately, union representatives that it had left the negotiating table without any result obtained, with the controversy about reforms with Athens have yet to be resolved. Recently, Greece has tried to come to an agreement by submitting reforms to Pierre Moscovici, ecnomic director of the European Commission (EC). But a spokesman said Mr. Moscovici answered the Greek finance ministers that their proposals are insufficient. If negotiations “going nowhere”, the risk of Greek debt default and leave the Euro zone could totally happen.
  • In addition, according to Germany’s Bild newspaper, a person familiar with the matter said the German government is organizing a meeting focusing on what to do in case of Grexit. The meeting took place after the IMF left Brussels. Thus, in the worst case scenario, Greece will go bankrupt, political instability looms. Shortly after this news, bonds yield immediately rose. According to Bloomberg, at 6:08 am in London, 10-year bond yields fell 1 point to 2.37%. We can see, in this context, investors will tend to seek the heaven assets such as gold or bonds.
  • Asian stocks show little change in today, as Greek concern looms. Asian people who often have little risk appetite may choose gold as a safer investment. Although China’s stock is on the incredible growth, but this may be a sign of a bubble. Thus, capital can flow from the stock market to precious metals.
  • “QE” is happening globally, meaning that the risk of inflation may occur. In Europe, inflation rose 0.3%, core inflation (excluding energy and food prices) rose 0.9%, the highest level in nine months. In the last 4/6 days, Mario Draghi, ECB president said the European economy is recovering and inflation is on track. Gold has always been the first choice for dealing with inflation, so gold demand is likely to go up.
  • According to research by Simona Gambarini, expert at Capital Economics, gold is likely to “prosper” in this year as supported by demand from central banks. Recently, Russia has said it is planning to raise its foreign exchange reserves to 500 billion dollars in the next few years. The Russian Central Bank is purchasing a lot of gold recently  (with 30 tons in March and 8.3 tons in April).

However, gold prices may also continue to slip by the following reasons:

  • Last night, reports from the US showed retail sales in May flourished in an impressive way with an increase of 1.2%, exceeding expectations of 1.1% and excels compared to the previous month of 0.2 %. Meanwhile, the number of applications for unemployment benefits last week rose slightly to 279,000 from 277,000 of the previous week. These are signs that biggest economy in the world continues to strengthen, enhancing a possible rate hike in September. Dollar uptrend supported by positive figures may hurt gold demand.
  • Stock market is overheating, especially in China, attracting large capital flows into the line, negatively affect the precious metal.
  • Holdings in ETPs has slipped to a record low since the global financial crisis. Total holdings in the SPDR Gold Trust fund fell 0.2% to 704.22 MT, the lowest level since September 2008. Gold reserves in these funds has declined to 48% since December 2012. It seems that investors are losing interest in the precious metal.
  • At the end of the week, many investors tend to close orders, creating downward pressure on gold prices.

Forecasting: Gold prices likely to go up, towards the level of $ 1,297.11/ounce.

Hanh Nguyen