Vietstock - Global gold prices have previously shown signs of 'overbought', what will happen in the near future?
Gold prices fluctuated very strongly, hitting a peak of $3,500/ounce then plummeting and rebounding again. Many believe gold prices have peaked after the overbought phase. However, some analysts argue that the upward trend has not yet ended.
Unprecedented fluctuations
Global gold prices just experienced a week of very strong fluctuations, hitting an all-time high before plummeting, then quickly recovering and then dropping sharply again.
Specifically, on April 22, gold prices in the US market surged to a record high of $3,500/ounce (equivalent to over 111 million VND/tael) as the USD fell to its lowest level in 3 years. The SJC gold price in Vietnam reached 124 million VND/tael at one point (selling price).
Capital is flowing strongly into gold as a safe haven amidst escalating US-China trade tensions. US President Donald Trump imposed a 145% tariff on Chinese goods from April 10 and threatened to raise it to 245% due to retaliatory measures from Beijing.
Mr. Trump also made several tough statements against China and publicly criticized Federal Reserve Chairman Jerome Powell.
However, gold prices later fell sharply. In trading on April 24, gold prices plummeted, at one point falling to $3,270/ounce, down 3% in one day and down 6.6% from the peak as US-China tensions eased somewhat and Mr. Trump stated there was no intention to fire the Fed Chairman.
This information boosted optimism in the stock market and strengthened the USD, thereby triggering profit-taking activities for gold.
Jim Wyckoff, a senior analyst at Kitco Metals, said: 'The rise of the stock market and the USD index negatively affects gold.' However, gold prices later recovered to $3,360/ounce on the morning of April 25 thanks to new buying from central banks.
But by 9 PM on April 25 (Vietnam time), spot gold prices fell back to $3,270/ounce (104 million VND/tael) after Mr. Trump announced he had a phone call with Chinese President Xi Jinping about tariffs.
Global gold prices fluctuated dramatically during the week of April 21-25. Photo: KC
There has been a phenomenon of 'overbought'
In the coming time, gold prices will depend on many factors: the US-China trade war, geopolitical tensions in Ukraine and the Middle East, central bank policies, and the movements of the USD.
Although gold is currently in an 'overbought' state as TD Securities noted, experts on Kitco believe that gold still has the potential to increase in price as it is not widely held by investors. Countries and organizations have recently shown more interest in gold and continue to trend towards increasing purchases despite rising prices.
On Kitco News, Bart Melek, the Head of Commodity Strategy at TD Securities, stated that investors are betting on a downward correction after gold prices surged above $3,400/ounce, which according to technical analysis showed signs of 'overbought'.
However, looking at the broader context, Bart Melek believes that gold has not yet received adequate attention from many investors.
According to him, the current price is not yet a historical high, as when adjusted for inflation, spot gold prices in the 1970s reached $3,544/ounce, higher than the peak of $3,500/ounce set on April 22.
'Looking at gold prices in the past, along with the cost curve, it can be seen that gold prices can go much further,' Bart Melek predicted.
However, due to having increased over 25% since the beginning of the year, gold prices may experience a correction. This expert mentioned that he is monitoring whether gold can maintain the strong support level of $3,100/ounce.
Also on Kitco, Ryan McIntyre from Sprott Inc. noted that gold has a lot of room to increase in price in the long term. Accordingly, returns from gold will be 'no worse than returns from US stocks in the next decade.'
McIntyre noted that instability is spreading in the financial markets beyond the economic sphere. He explained that the desire to fire the Fed's leadership creates legal instability in the US. He pointed out that trust in the US is eroding as both the USD and Treasury bonds are being sold off.
Although the market has calmed down, McIntyre reminded that the damage has occurred and it will take time for the US to regain confidence.
'I don't think the USD will lose its reserve currency status overnight. That won't happen tomorrow, but it's clear that people are using it less and less,' he said. 'I think we will continue to see countries holding more of their own currencies, or something independent like gold.'
In addition, demand from central banks will continue to support gold prices, making gold an attractive safe haven, even when prices are high.
Although ETF funds have poured a significant amount of money into gold this year, the amount of gold held by these organizations is still 20% lower than the record high of 2020.
If US-China trade tensions escalate further, especially with new tariffs in key industries, gold prices may retest the $3,500 mark, with some analysts predicting a rise to $3,600 by mid-2025.
Even JPMorgan forecasts gold prices to reach $4,000 in 2026.
Conversely, if there is a diplomatic breakthrough, as suggested by Mr. Bessent, gold prices may be restrained, heading towards $3,200 or lower.
Recently, conflicts in Ukraine and the Middle East have strongly supported gold prices. If the conflicts ease, profit-taking pressure may appear. Nevertheless, as mentioned above, US policies and global instability remain the driving forces pushing major players globally, including central banks, to buy gold. The degree of decline in gold prices is considered not too deep.