Why are gold prices falling sharply?

Gold prices in Vietnam have experienced a significant decline, mirroring global trends but with a more pronounced drop domestically. SJC gold bars are currently listed at 146.2 million VND for buying and 150.2 million VND for selling. Popular unadorned gold rings are being bought by businesses around 146.2 million VND and sold at 149.6 million VND.

The gap between domestic and international gold prices has narrowed considerably. It now stands at just over 11 million VND, a stark contrast to periods when it exceeded 20 million VND. This rapid adjustment in the Vietnamese gold market has captured the attention of investors, with many expressing concern on forums about the speed of the domestic price correction compared to the global market.

Economic expert Le Ba Chi Nhan suggests that the Vietnamese gold market is undergoing a necessary adjustment phase after an extended period of high prices and a significant divergence from international rates. He notes that domestic gold businesses often adjust prices more aggressively to mitigate inventory risks and balance their business operations. The widening spread between buying and selling prices, now around 3 to 4 million VND per tael, reflects increased risk management strategies by these businesses in response to unpredictable market fluctuations.

Nguyen Quang Huy, CEO of the finance-banking faculty at Nguyen Trai University, explains that the sustained higher price of gold in Vietnam compared to the global market has led to a more substantial decrease during market corrections. He states that as the market adjusts, not only does the global gold price fall, but the domestic premium also tends to shrink, resulting in a steeper decline domestically. Experts believe this recent price drop should be viewed within the context of a global financial market repricing, rather than a complete reversal of underlying support factors for gold. The US Federal Reserve's monetary policy, with the possibility of maintaining current interest rates longer due to persistent inflation, makes dollar-denominated assets more attractive and increases the opportunity cost of holding gold.

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When the market adjusts, not only is the global gold price falling, but the domestic premium also tends to shrink. Therefore, the decrease in domestic gold is often stronger than the international trend.