HANOI: The domestic gold market shone last week, with prices for gold rings breaking records and even surpassing the buying price of SJC gold bars.

However, experts warn investors to avoid borrowing money to purchase gold.

At the close of the week, gold ring prices were quoted at up to 82.75 million dong per tael (for buyers and up to VND83.45mil per tael for sellers. These represent all-time highs for both buying and selling prices for gold rings.

Throughout the week, gold ring prices continued to reach new record levels.

For SJC gold bars, prices remained stable after Tuesday’s hike, with a buying price at 81.5 million dong or about US$3,454 per tael (about 37.8g) and a selling price at 83.5 million dong per tael.

This marked the highest price level for SJC gold bullion since June 3, when the State Bank of Vietnam (SBV) increased the supply of SJC gold bars through select commercial banks and Saigon Gems and Gold One Member LLC.

As a result, the spread between SJC gold bars and gold rings narrowed to just 50,000 dong per tael, its lowest ever level.

The record rallies were driven by a similar trend of global gold prices, Nguyen Duc Hung Linh, chief adviser at Think Future Consultancy and Investment said.

Linh noted that global gold prices are influenced by a multitude of factors in the international financial landscape.

The US Federal Reserve (Fed) recently reduced interest rates by 0.5 percentage points after a prolonged period of rate hikes aimed at curbing inflation.

The rate cut has propelled the value of gold upwards.

At the same time, the US Dollar Index, which measures the performance of the US dollar against a basket of five major currencies, remains stagnant.

The depreciation of the US dollar has, in turn, increased the appeal of gold, pushing prices up.

Beyond the Fed’s monetary policy adjustments, several other factors are contributing to the rise in gold prices, Linh added.

Geopolitical tensions and localised conflicts have heightened demand for gold as a safe asset.

Additionally, central banks worldwide are actively acquiring gold, recognising it as a crucial reserve asset.

Investor optimism about gold’s upward trajectory is also prompting increased acquisition and hoarding of the precious metal.

These combined factors have pushed global gold prices above US$2,600 per ounce.

The spot gold price closed last Friday at US$2,657.9 per ounce, after hitting a historic high of US$2,685.42 last Thursday.

Giving further insights on domestic gold price trends, Linh said that global gold prices adhere to the principles of supply and demand, which are beyond absolute control.

This contrasts with the dynamics of the gold market in Vietnam.

Vietnam’s gold market is divided into two key segments that draw investor attention: gold bars and gold rings.

Gold bars are aligned with the nation’s price stabilisation policy.

Recent efforts by SBV have successfully driven down gold bar prices from approximately 92 million dong per tael to around 80 million dong per tael.

Meanwhile, gold rings, which are not subject to price stabilisation, continue to follow market forces of supply and demand.

Thus, despite rising global gold prices, the prices of domestic gold bars are unlikely to see significant increases due to controlled supply and regulated pricing.

However, gold ring prices are anticipated to continue their upward trend, as they operate more in line with the principles of supply and demand.

Experts from Citi Research forecast that global gold could reach US$3,000 per ounce by mid-2025 and US$2,600 by the end of 2024, driven by US rate cuts, strong demand from exchange-traded funds, and over-the-counter physical demand.

“Gold prices are forecast to potentially rise to US$3,000 per ounce, equivalent to 90 million dong per tael, by 2025. With gold being viewed as a haven, there are expectations for its price to increase,” said Dr Nguyen Trí Hieu, a finance expert.

“If that is the case, it is likely to affect the domestic gold market. However, as long as the gold stabilisation programme persists, gold ring prices will likely soar this year and early next year.”

He also warns that amid the frenzy, it is crucial to avoid borrowing to purchase gold. If prices suddenly drop, borrowers could face heavy financial losses and debt repayment pressures simultaneously.

 - ANN