After a nearly 6% drop in the trading session on October 21 - the sharpest decline in a session in more than 10 years, on the morning of October 23, world gold prices continued to decline, making investors dizzy. However, experts say that this could just be a technical break before the market establishes a new price level around $4,000/ounce.
The world gold price at 10:49 (Vietnam time) continued to sink into red, extending the historic drop of the previous session, down to 4,082.7 USD/ounce.
According to ING analysts, this sharp decline comes from the massive profit-taking wave after a long period of "excess buying". Investors have begun to worry about the sustainability of the hot-up trend over the past few weeks, INGs report stated.
The main reason is believed to be the cooling of US-China tensions, causing demand for safe-haven assets to decline.
In addition, investors are cautiously waiting for US inflation data (delayed) and upcoming trade talks between the US, China and India, which could create unpredictable fluctuations in the commodity market.
After continuous increases since September, the market has reached a tropical level. The recent sell-off was largely technical, a natural adjustment phase after many weeks of profit accumulation, said Russell Shor, senior analyst at Tradu.com.
According to Mr. Shor, spot gold prices have fallen below $4,070/ounce, but long-term gains have not been broken because fundamental factors such as the prediction of a Fed rate cut, a weak USD and net buying demand from central banks are still present.
The sharp decline has caused many large financial institutions to start changing their gold price forecasts. Citigroup has just lowered its gold investment recommendation from excess buying to cautious, saying the increase has gone too far against the fundamentals.
Citigroup's commodity research team, led by Charlie Masi-Collier, warned that the market could enter a period of accumulation around $4,000/ounce in the coming weeks. Factors that have supported gold such as net central bank purchases or exchange rate risk hedging may return later, but at the present time, there is no reason to rush to buy the report stated.
Citigroup believes that the profit-taking trend will continue as the proportion of buying positions in ETFs and futures contracts remains at a record high.
This correction is a healthy signal, said Robert McNally, a former White House energy adviser. If gold only increases but does not decrease, that is a concern. The market is self-regulating before entering a new balancing stage".
Most analysts agree that gold will fluctuate in the range of 3,950 - 4,150 USD/ounce in the short term, before having a clearer trend after the Fed's monetary policy meeting next month.
If the Fed starts cutting interest rates as expected by the market, gold prices could gradually recover to the $4,200/ounce range by the end of the year. Conversely, if inflation data forces the Fed to maintain a tightening policy for longer, gold could continue to face profit-taking pressure in the short term.
Regarding domestic gold prices, as of 9:00 a.m. on October 23, SJC gold bar prices were trading around 147.6 - 148.6 million VND/tael (buy - sell).
Bao Tin Minh Chau 9999 gold ring price is trading around 150 - 153 million VND/tael (buy - sell).
