Visible Downward Trend of Gold Price

The transaction on December 3 with a reduction rate of over 2.6 percent, the gold prices has decreased by US$32.8 per ounce in the New York market and ended at US$1,220.3 per ounce. In this transaction, the gold price has dropped to US$1,217 per ounce, at the lowest point in the past 5 months. The experts analysed that in terms of technical analysis, the gold price reached over the subsidised price of US$1,250. Therefore, the next subsidised price will be US$1,240. Compared with the peak record of US$1,920.3 per ounce in September 2011, the price of precious metal fell to US$674.

 

The big drop of the world gold prices leads a sharply declining price of the gold in Vietnam to about VND35.2 million per ounce for the SJC gold. The gold price chart shows that this has been the lowest price of SJC gold for the past 37 months. However, as usual, the domestic gold price is always kept lower than that in the world market so the domestic gold price is now VND4 million per tael higher than the world price and higher than the VND3.6 million of difference previously.

 

The downward trend of the gold price has been predicted before, but the speculators as well as the gold holders, who keep the idle properties converted to gold, feel shocked and could not make an immediate response. Over the past 3 months, the SJC gold bar has been decreased by VND3.3 million per tael. Since March 28, the State Bank of Vietnam has held 70 auctions of gold bars, with total winning volume of 1,725,700 million gold taels (equivalent to 66.3 tonnes) over total bidding volume of 1,837 million gold taels. The loss of the gold holders or speculators is very high.

 

The problem puzzling the investors is the non-stop downward trend of gold price. The likelihood of bringing the easing solution of Quarter 3 (QE3) to an end will make the gold price devalue. The US economy is showing signs of recovery obviously through the reports on manufacturing, unemployment rate and real estate market. The QE3 stimulus package which is on the track of being immediately cut in December make the US dollar be stronger while devaluing the gold price. The decision on cutting the QE3 stimulus package may be given in the monetary policy meeting periodically on December 17-18.

 

Some recent international organisations also forecast about a drop of gold price. The Open Swiss Bank (UBS) has lowered its target gold price for next month from US$1,450 per ounce to US$1,180 per ounce. The target selling gold price of next 3 months has been also lowered from US$1,375 per ounce, as proposed by the UBS in last forecast, to US$1,100 per ounce by the UBS. Earlier, the ANZ has cut its average gold price in 2014 from US$1,436 per ounce in the last forecast to US$1,269 per ounce in the recent forecast. ANZ said that a weaker demand than expected and pessimistic views towards the market are basis for a drop of the gold price. According to the Goldman Sachs' reports, the price of gold will drop to the US$1,050 per ounce by the end of next year.

 

Some investment funds continue to accelerate the gold sales. SPDR Gold Trust, the world's largest trust fund, continues to sell 3.3 tonnes of gold, reducing the gold reserve to 848.9 tonnes. In addition, the actual gold buying force is weak while the US dollar is stronger and the stock market exposes good signals, which make the investors turn their back to gold trading and causes the gold price to be devalued.

 

2013 is not a year for gold trading. It is the first year the gold price has been dropped sharply after 12 years of rising and the price is decreased by 20 percent.

In the Vietnamese market, the demand for the gold bars is really low at this time; besides, the new supplies for gold is still being procured by the State Bank of Vietnam and the exchange rate of USD/VND is relatively stable. All of the factors drive the domestic prices to be on the same downward trend of the global gold price. Compared with the gold price of the beginning of the year, the SJC gold price has fallen over VND11 million per tael.

 

Another taken risk is that the difference of VND4 million between domestic prices and international prices tend to be bridged gradually. In the long term, it is more likely that the domestic price will be gradually pulled down to closer to the world price. The risks of the gold holders can be foreseen.

 

The Vietnamese people lined up to buy gold bullion in the gold rush of the waves but once the prices fell sharply, the market is now bleak. At the time of the gold price of VND49 million per tael, a huge demand for gold caused an out-of-stock status. However when the gold is priced at about VND35.2 million per tael, the demand is too low. Many gold selling points reflect that the volume of gold bars bought is larger than the volume sold. The sales of gold jewellery are still good because the customers want to use gold for two purposes: jewellery as well as gold reserve. According to PNJ, in October, the sales of gold jewellery are now 40 percent higher than the same period last year. Besides, the price of jewellery is VND2 million per tael lower than the gold bars so the risks related to price differentials are lower than the gold bars.