Gold prices may rebound after a deep drop

Gold prices both domestically and globally on March 23 continued to have a sharp decline. At one point, the world price lost the $4,200 per ounce mark and the domestic price also dropped to VND162 million per tael before recovering to VND166 million per tael. Will gold prices continue to drop deeply and should investors buy at this time?

Nguyen Tri Hieu, a finance and banking expert, said that the downward trend of gold prices recently has been heavily influenced by the geopolitical situation, especially tensions in the Middle East. 

According to Hieu, when conflicts escalate, risk aversion sentiment causes cash flow to pour strongly into safe-haven assets like gold and oil, pushing prices up. However, at the present time, although tensions still exist, the market is entering a "waiting" phase, as the parties involved have not yet made clear escalating moves. 

"Investors have temporarily reduced their concerns, thereby lowering their gold holdings," Hieu remarked.

In addition to geopolitical factors, the strength of the USD also puts pressure on gold prices. When the US Dollar Index (DXY) rises, gold priced in USD tends to decrease. At the same time, after a period of hot growth and continuously setting peaks, many investors sold to take profits, contributing to pulling world gold prices back to the area above $4,100 per ounce.

In the domestic market, gold prices have also adjusted in line with global trends but at a slower pace, widening the gap between the two markets.

According to Hieu, the main reason lies in the imbalance between supply and demand. Domestic gold supply remains limited, while demand for holding gold among the public is still high. In addition, expectations of further price increases have led many investors to buy at high levels, pushing the gap to nearly VND30 million per tael.

Hieu believes that future movements will largely depend on developments in the Middle East. If tensions ease or a ceasefire is reached, gold prices could fall further, even below $4,000 per ounce.

However, he considers this scenario unlikely, as parties continue to maintain firm stances and the risk of prolonged conflict remains high. In a scenario where tensions escalate, especially if large-scale military events occur or disruptions happen in the Strait of Hormuz, gold and oil prices could rise again.

For the domestic market, Hieu said gold prices could fall to around VND150 million per tael, but the probability is low, at only 20–30 percent. Meanwhile, the likelihood of prices rising again above VND180 million per tael is higher, driven by both global factors and domestic supply-demand dynamics.

In addition, although policies have been adjusted to expand the market, actual gold supply has not significantly improved, while demand for investment and accumulation remains high.

Economist Phan Dung Khanh also thinks the correction in domestic gold prices is mostly driven by global market movements. The reason is that the rising DXY index has put downward pressure on gold.

However, the slower decline has widened the gap between domestic and global prices to nearly VND30 million per tael. Therefore, according to Khanh, whether domestic gold prices fall to VND150 million per tael will largely depend on whether global prices continue to decline sharply.

Why gold sold off despite being a safe haven?

Explaining why gold, traditionally a safe-haven asset, is still seeing strong selling pressure during declines, Hieu said the market currently consists of two groups of investors.

The first group consists of short-term investors seeking profits. This group reacts quickly to price fluctuations and is willing to sell when they perceive downside risks. The second group consists of long-term investors who hold gold as a store of value and are less affected by short-term volatility.

“Currently, short-term, profit-seeking investment is dominating, making the market more sensitive to psychological and geopolitical factors,” Hieu said.

Meanwhile, Khanh said after years of strong increases, gold prices are already at high levels, leaving limited room for further gains while risks are rising. In this context, capital tends to shift to other assets, including the US dollar.

“Gold and the US dollar typically move in opposite directions. When the dollar strengthens, gold comes under pressure, and vice versa,” he said.

Duy Anh