Gold trading burning bright

Especially, the price of the precious metal hit a record $1,432 an oucce on December 7, 2010, driving up the gold price in the domestic market to VND38.2 million ($1,910) per tael correspondingly.

Gold prices surged in 2010, recording more than double the growth of US’s Dow Jones Industrial Average index, which only rose 10.27 per cent against 2009. Meanwhile Vietnam’s stock market index, VNIndex, fell 7.5 per cent throughout 2010. By the end of 2010, the gold price in the domestic market soared to 34.46 per cent against prices at the beginning of the year, 10.8 per cent more than global prices.

Analysts ascribed the leap in gold prices on the domestic market to the following reasons. First, it stemmed from escalating gold prices on the world market. Second, Vietnam had been affected by economic crisis in the US and some other countries as the Vietnamese dong is closely tied to the US dollar and due to the openness of Vietnam’s economy.

According to Vietcombank (VCB)’s latest report, the official Vietnam dong-US dollar exchange rate hiked more than 5.52 per cent in 2010 (and 13 per cent based on the black market exchange rate).

The price of gold on the world market was forecast to hit $1,575 an ounce in 2011 based on quantitative technical analyses, jumping 13 per cent against current levels, wrote Gary Wagner, a technical market analyst for 25 years and the executive producer of the daily video newsletter The Gold Forecast featured on the website www.kitco.com.

The Vietnam dong-US dollar exchange rate was also ominously predicted to hike further in 2011 as the consecutive trade deficit in past years had led to a shortfall in current accounts and significantly reduced foreign currency-reserves at the State Bank of Vietnam.

According to Ministry of Industry and Trade figures, Vietnam’s trade deficit stood at $14.12 billion in 2010, representing nearly 20 per cent of the country’s total exports (not including that of gold).

The high deposit rate, growing inflation pressures and macro-instability have badly influenced capital inflows, one of essential factors to help stabilise the Vietnam dong-US dollar exchange rate.

According to local gold traders, the price of gold in 2011 would be unlikely to fall below VND35 million ($1,750) per tael and it is even expected to hit a high of VND40 million per tael (a tael is equivalent to 1.2 ounces) during the year. Economic uncertainties would not be addressed in a comprehensive manner, at least in the first half of 2011, according to analysts.