After a sharp increase right when US airstrikes targeting Iran broke out last weekend, gold prices fell again, dragging down mining stocks deeply.
In the trading session on March 3 in the US, the world's largest gold ETF SPDR Gold Trust fell by about 4%, as spot gold prices retreated to around 5,130 USD/ounce, after surpassing the 5,400 USD/ounce mark 1 day earlier.
The sharp correction caused the stocks of gold mining "giants" to plummet. Newmont Group - the world's largest gold producer - lost more than 8%, becoming one of the deepest losers in the S&P 500 index.
Other mining enterprises such as Barrick Gold and Freeport-McMoRan also simultaneously decreased sharply.
Why are shelter assets being sold off?
Usually, when geopolitical conflicts escalate, gold - a traditional safe haven asset - will increase in price. However, according to commodity experts, "risk compensation" brought about by war often increases very quickly but also easily disappears.
JPMorgan Chase's global commodity research group believes that waves of gold price increases driven by conflicts are often difficult to maintain for long.
In the past, gold had increased sharply in major wars in the Middle East and North Africa, but the upward momentum quickly weakened as the market gained more clear information about the situation.
A similar scenario occurred in the Iran-Iraq War in the 1980s, the Gulf War 1990-1991 or the Iraq war in 2003. However, JPMorgan still maintains an optimistic view of gold and forecasts gold prices at the end of the year to reach 6,300 USD/ounce.
USD appreciation puts pressure
Another important factor is the strong recovery of the USD. The USD index - measuring the strength of the greenback against a basket of 6 major currencies such as the euro, British pound and Japanese yen - rose nearly 1% in the afternoon session of March 3, to the highest level since mid-January.
Mr. Jamie Cox, managing partner at Harris Financial Group, said a "big reversal" in the currency market is spreading as cash flow turns to the USD as a safe haven.
Gold prices often fluctuate in the opposite direction to the USD. As the greenback strengthens, gold becomes more expensive for investors holding other currencies, thereby putting downward pressure on prices.
Precious metals simultaneously ignite
Not only gold, other precious metals also suffered the same fate. Spot silver prices fell by about 7%, while platinum and palladium also plummeted sharply.
This development shows that the market is entering a phase of rapid revaluation after the initial geopolitical shock. Instead of focusing only on the risk of war, investors are now considering the strength of the USD and global economic prospects.
World gold price at 10:46 AM on March 4th Vietnam time traded at 5,160.09 USD/ounce, down 136.04 USD, equivalent to 2.57%. World silver price 83.91 USD/ounce, down 4.71 USD, equivalent to a decrease of 5.31%.
Regarding domestic gold prices in the Vietnamese market, SJC gold bar prices at 10:41 AM on March 4th traded at 181.2 - 184.2 million VND/tael (buying - selling). Bao Tin Minh Chau 9999 gold ring price is listed at 182 - 185 million VND/tael (buying - selling).
