Capital Is Flowing into Gold

According to the latest report from the World Gold Council (WGC), Vietnam ranks 7th in the world's total gold consumption in 2013. Not only are speculators interested in the price of gold, people who keep savings in gold also pay special attention to the gold price. The sharp decline of the gold price after 3 months has made the transactions in golds vibrantly.

The domestic gold price is being adjusted after reaching its highest level in the recent three months. The gold trading becomes thriving at the period the gold market is still fluctuating. On early morning on February 20, the price of gold fell to VND250,000 per tael compared to the previous day. The Doji Group listed the gold price down from 36.37 to 36.45 million per tael. This is the lowest level since the market rose sharply from the mid-May.

 

Contrary to many pessimistic forecasts for the gold price in 2014, the gold price has increased significantly since the beginning of the year. Ending the session on February 17 in the U.S., each additional ounce of gold rose by US$10 to US$1,329. Although the price of gold has been readjusted after that, the investors are forced to reconsider their assessment of the gold price this year. The driving forces to support the gold price which come from the concerns of the economic growth of the U.S. and the devaluation of the U.S. dollar have led the investment in gold, pushing up the precious metals prices to the highest level since early November last year. Since the beginning of the year, the gold prices have increased by 10 percent after falling by 28 percent last year.

 

The domestic market is put at the same scenario in which the domestic gold price always climbs faster than the world price and go down more slowly. The difference between two markets is made bigger at from VND2.7 million per tael to over VND2.9 million per tael. Converted at the bank rate, a teal of gold on the world market is equivalent to about VND33.79 million, not including taxes, fees and processing. The domestic price is at around VND36.37 million to VND36.45 million.

 

On the world's major markets, the gold price is expected to continue to rise again, the price of gold of the contract of April has been increasing in the 9 consecutive sessions, which has been the longest increase since May 7, 2011. The gold price tends to increase since the domestic demand for gold has increased due to the concerns of the rising gold price in the future. The gold suppliers have certified that the gold sales have increased sharply. The PNJ company said that the volume of the gold transacted yesterday has increased while the sales are virtually unchanged. At the gold selling points, the number of gold buyers has increased by 20 to 30 percent compared to the time before Lunar New Year.

 

It is forecast that the gold price has been adjusted differently from the price since the beginning of the year. The WGC's report predicts the gold price could rebound this year while the gold sales of the trust funds will slow down. In 2013, the big sales of 881 tonnes of gold the trust funds make the demands for the gold investment decrease by 51 percent equivalent to 773 tonnes of gold. The gold prices have dropped to the lowest level for recent 32 years. However, this year's sales are not strong; the SPRD Gold Trust, the largest world gold trust fund, has just sold only a small amount.

 

According to the Trend Report 2013 of the WGC, the gold demand will rise sharply in 2014. The WGC estimates that the gold demands in the Vietnamese market in the last year are equal to 92.2 tonnes, worth more than US$4.1 billion. Both the demands for gold jewelry and investment tend to increase.

 

Notably, the demand for the precious metal has fallen down by 15 percent on the international markets but increased by 20 percent in Vietnam in 2013. Vietnamese people put special trust in this precious metal. It is reasonable to predict that gold demand will not rebound strongly this year as the price is expected to rise.

 

This year the economy is still evaluated to be difficult. The savings rates tend to fall due to the stagnation of manufacturing business operation. The inflation which has been curbed for the past 3 years is under the risk of returning. This makes many people to decide to buy gold to secure their capital and wait for a better economy.

 

The gold price has risen by 10 percent at the beginning of the new year, which makes people more determined to buy gold to avoid the idle cash. It is also a fact that in the Vietnamese market, people often rush to buy gold once the "gold fever" signals start. However, the loss caused by the sharp decline of the gold price has made the buyers more cautious. This makes people be cautious of their investment in gold even though the gold price declines after the "gold fever" period.