Be careful with the gold "fever"

In recent days, domestic gold prices have continuously reached all-time highs. Gold has never been as expensive as it is now. Although the domestic gold price opened on the morning of March 13, it decreased compared to the previous day following the downward trend of world gold prices, but it is still at a very high level. Each tael of SJC gold bar is sold at 82.32 million VND, and bought at 80.2 million VND. Gold rings are bought and sold at 69.48 - 70.78 million VND per tael. Since the beginning of the year, each tael of gold bar has increased by more than 9 million VND, equivalent to more than 13%. Gold rings are more expensive by 7 million VND per tael, equivalent to more than 11%. Many people ask why gold has been "crazy" recently? Is it safe to invest in gold at this time?

According to some financial experts, the domestic gold price has continuously reached new peaks in recent times due to the sharp increase in world gold prices. The reason is that the world's geopolitical tensions have not shown any signs of cooling down. Conflicts in Europe, the Middle East and instability in the Red Sea are still complicated, so investors choose gold investment channels as a "safe haven". China's economy is weakening as its stock and real estate markets continue to fall sharply, causing investors in the country of one billion people to hoard gold, contributing to the increase in world gold prices. In addition, the US Federal Reserve (Fed) announced the possibility of cutting interest rates in the near future, causing the strength of the USD to decrease, leading to an increase in gold prices.

In addition to the high world gold price factor, the increase in domestic gold price is also due to a number of reasons when many investment channels are no longer attractive. Deposit interest rates at banks are maintained at a very low level. Although the stock market has grown compared to the beginning of the year, it is always volatile and is only for investors who are knowledgeable about the financial sector. The corporate bond market is gloomy for a long time when investor confidence has not returned. The real estate market continues to face difficulties in the mid- and high-end segments. The production and business sectors have improved but recovered slowly. Although the State Bank continues to maintain a loose monetary policy to promote economic growth, the capital absorption capacity of enterprises is still weak. A recent report by the State Bank shows that outstanding credit in January 2024 decreased by 0.6% compared to December 2023.

While some investment channels are no longer attractive, it is understandable that people buy gold to store to preserve the value of their assets. However, some economic experts recommend that people should not spend all their money on gold but should allocate it to asset classes such as stocks, bonds, real estate, deposits, fund certificates, etc. to prevent risks. According to the structure of the asset pyramid model, gold is a layer of defense, quite safe, but the gold market has fluctuated too much in recent times, causing investors to face great risks.

The US inflation index report for February 2024 was released in the early morning of March 13 (Vietnam time) with the score continuing to increase, so the possibility of the Fed cutting interest rates at the next meeting 10 days later is very unlikely. Immediately, the world gold price turned down by 27 USD/ounce compared to the previous day, to 2,158 USD/ounce. Domestically, the State Bank is urgently preparing for a summary and evaluation meeting to advise the Government to amend Decree 24/2012 on the management of gold trading activities with the aim of pulling the domestic gold price closer to the world gold price. Currently, the gap between domestic and world gold prices is at a very high level. With the world gold price of 2,158 USD/ounce, the converted domestic gold price is equivalent to 65.3 million VND/tael. Thus, each tael of domestic SJC gold is more than 17 million VND more expensive than the world price, and ring gold is 5.5 million VND more expensive. This is a very big risk for investors "chasing the peak" of current gold prices.