Domestic and global gold prices have skyrocketed to new all-time highs, breaching 140 million VND/tael and $3,960/oz. But experts warn the rally is "overripe" and a significant mid-cycle correction, potentially as deep as 11%, could be on the horizon. An in-depth analysis from Bank of America.
The gold market has recently experienced unprecedented movements, with both domestic and international prices simultaneously shattering historical records. However, behind these "dizzying" increases, top experts are sounding the alarm: the price surge has become too "hot," and a mid-cycle correction seems almost inevitable. Are investors standing on the brink of a significant sell-off?
The domestic market witnessed unprecedented gains. In the session of October 6 alone, the price of SJC gold bars surged by an additional 1.5 million VND/tael, pushing prices to record levels: 138.1 million VND/tael (buying) and 140.1 million VND/tael (selling). Taking a broader view, since the beginning of October, SJC gold has increased by 3.3 million VND, and compared to mid-September, the staggering increase has reached 9 million VND/tael. On the morning of October 7, the upward trend continued, pushing prices to 138.6 - 140.6 million VND/tael.
On the international stage, the buying frenzy was no less intense. Spot gold charged towards the crucial psychological barrier of $4,000 per ounce (equivalent to 128.1 million VND/tael). As of the morning of October 7 (Vietnam time), spot gold was traded around $3,963 per ounce, after having touched nearly $3,980/oz in the overnight session. Even more impressive is that from the beginning of 2024 to now, global gold prices have risen by nearly 51%, the best annual performance since 1979—that is, after more than 45 years.
Amid a market flooded with optimism, the voice of Paul Ciana, Technical Analyst at Bank of America (BofA), offers a sober and cautious perspective. Although BofA itself was one of the first institutions to forecast gold reaching $4,000 per ounce by early 2026, Mr. Ciana bluntly states: "Gold has achieved most of its upside potential and is currently in an overbought condition."
According to him, a series of multi-timeframe technical signals are warning of the exhaustion of the upward trend. He predicts a consolidation or correction is highly likely to occur as early as Q4 2024.
To support his argument, Paul Ciana points out valuable historical lessons:
2015-2020 Period: Gold rose by 85% before plummeting by 15% in 2022.
Current Rally (since Oct 2023): Gold has risen an incredible over 120%, from the $1,800 zone to nearly $4,000 per ounce.
History shows that such strong and prolonged rallies are often followed by significant sell-offs to "catch their breath" for a new trend. Furthermore, Mr. Ciana highlights a worrying technical signal: Gold has closed higher for seven consecutive weeks. And in all 11 historical instances of this phenomenon, gold prices were lower in the subsequent four weeks.
So, if a correction occurs, how severe could it be? The BofA analyst outlines critical support levels:
Initial Support Level: $3,790 per ounce. If this level breaks, selling pressure will intensify significantly.
Worst-Case Scenario: Gold could drop sharply to the $3,525 per ounce zone (equivalent to about 113 million VND/tael). This equates to a correction of approximately 11% from current levels.
He also emphasized that gold is currently trading about 21% above its 200-day moving average—an area where price peaks often form. Even more strikingly, it is about 70% above its 200-week moving average, an extremely rare condition seen only three times in history (2011, 2008, 2006).
While the global market fluctuates, the Vietnamese government is also taking action. A series of strong measures are being deployed to stabilize the gold market, based on the amendment of Decree 24/2012. Notable points include:
Mandatory bank transfers for gold transactions of 20 million VND or more (effective October 10).
Application of electronic invoices and data reporting to the State Bank for tighter monitoring.
Abolishing the monopoly on gold bar production, considering the establishment of a gold exchange, and imposing taxes.
These measures, along with efforts to stabilize the macroeconomy, control exchange rates, and inflation, are expected to make the domestic gold market more transparent and healthy, reducing the large disparity with world prices.
Although the long-term outlook for gold remains very positive, with scenarios suggesting it could reach $5,000 or even $7,000 per ounce, the short-term equation points to significant correction risks. Investors in this phase need to be extremely vigilant and should not FOMO (Fear Of Missing Out) into buying at overly high price zones. Closely monitoring technical signals, policy developments, and key support levels is the optimal strategy to preserve capital and seek opportunities during any corrective declines.
1. Why are experts warning about a potential gold price correction?
Experts from Bank of America believe the recent rally has become too "hot" and "overripe." Gold is in an overbought condition with multiple technical warning signals, such as having risen for 7 consecutive weeks—a historical pattern that often precedes a pullback.
2. How severe could the potential correction be?
Based on technical analysis, if a correction occurs, the first key support level is $3,790 per ounce. In a worst-case scenario, gold could drop sharply to around $3,525 per ounce, equivalent to a decline of approximately 11% from current peaks.
3. Is the long-term outlook for gold still optimistic?
Yes. Major banks like BofA maintain a positive long-term forecast, with scenarios where gold could reach $5,000 or even $7,000 per ounce in the future. However, in the immediate term, the market needs a healthy correction to consolidate and build momentum for the next leg up.
4. What should investors do during this period?
Investors need to be extremely cautious. They should avoid buying at very high price levels due to FOMO. It's advisable to closely watch key technical support levels (like $3,790/oz), stay updated on policy news, and have capital ready to potentially seize buying opportunities if a deep correction occurs.
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