Encouraging wider access to gold-based products

November 12, 2021 | 10:40
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As inflation picks up and global headwinds put pressure on risky investments, gold is being viewed as a safe approach to hedge risks. Andrew Naylor, regional CEO for APAC (excluding China) and Public Policy at the World Gold Council, discussed with VIR’s Celine Luu how Vietnam can develop more diversified gold products and predict consumer demand.

What is your outlook on the gold price for 2022?

Encouraging wider access to gold-based products
Andrew Naylor, regional CEO for APAC (excluding China) and Public Policy at the World Gold Council

It is impacted by demand, so if consumer demand and institutional investment are going to pick up, that is going to have an impact on the price. I would look at two things. Because gold has a jewel nature, when thinking about gold in the future, you need to consider consumer demand and institutional investment demand.

I expect consumer demand to continue to pick up, including in Vietnam. Last month many restrictions were lifted for people, so we expect demand to really pick up in Vietnam and continue to pick up elsewhere in the world when the economies perform better.

At the moment, investors are concerned about interest rates that have negative impacts on gold. But in the middle to long term, I expect institutional investors to start thinking more about inflation. We are looking at very high energy prices, commodity prices are going up, and inflation is starting to dominate. When inflation is a key concern, there will be institutional interest in gold as an effective hedge against inflation.

There is an assumption that Gen-Z is currently not that interested in gold but instead look to cryptocurrencies. Do you think this will push the price of gold down in the future?

This is a question we receive frequently. Cryptocurrencies and gold are very different asset classes and have a role to play, so we don’t think crypto will displace gold because they are very different assets and the demand is very different. Gold is used in jewellery, it is used by consumers, it is used in technology, and it is used by central banks as reserved assets. Cryptocurrency does not have diversified demand like gold. And because gold performs differently, it’s effective for portfolio diversification and can mitigate risk.

Cryptocurrencies also have risks attached to them, and if you’re exposed to risk you need to think about how you mitigate that risk – and gold is one of the risk mitigations. If you invest in crypto, you might want to think about investing in gold as well.

What are your suggestions to develop more diversified gold products in Vietnam?

For the retail market, I think it is really important that the industry starts developing digital channels for investing in gold. Examples are a gold investment account. Consumers could go to a bank and could have a cash account or securities account, and you also could have a gold account, where you can buy gold online or through a mobile phone. You can buy gold in smaller amounts, you can more easily trade it, and more easily use it as collateral and borrow against it to invest in a business. So, I think it’s really important that the industry should start looking at a digital gold product.

The World Gold Council launched some market research this year, specifically in Vietnam, and one of the key findings is that Vietnamese consumers are interested in being able to buy gold through an online channel. We still have physical gold – coins and rings, but we can just buy them online and they’re being stored on your behalf, and that just makes it much easier to trade and transact.

It’s also an opportunity for banks as well because we know that consumers like gold. Banks want more consumers, and if they start offering gold products as well, it means that they can be attractive to a new market.

On the investment side, I think the financial market in Vietnam is deepening and we have more capital markets and investment products available. I think it would be really important that consumers in Vietnam or institutional investors in Vietnam have access to gold exchange-traded funds. Again, you still buy physical gold and trade it, but this just means much more liquidity, it is much easier to trade, and institutional investors in Vietnam can benefit from the well-preserved and risk-mitigating properties of gold.

By Celine Luu

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