Gold loses appeal as prices plummet

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For the past quarter domestic gold has plummeted by 6 per cent to reach the lowest point since 2010. The selling price at Saigon Jewellery Company has been dropping consistently from VND34 million per tael ($1,347 per ounce) on July 14 to VND33.080 million per tael ($1,300 per ounce) on July 29. The same occurred at the DOJI Gold and Gems Group whose asking price stood around VND33 million for the last week of July.

This significant drop parallels that of global gold prices, which are also going through a gloomy period riddled with dramatic tumbles. As of July 29, gold was exchanged at $1,096 per ounce at Comex, $74 less compared to the beginning of the month.

“Due to these recent losses, gold has lost its appeal to investors and speculators for the time being, both in Vietnam and the world,” commented economist Vu Dinh Anh. Other experts have also warned that gold would be an unpopular choice for investment as prices are expected to drop even further this year.

According to reports from Phu Nhuan Jewellery JSC, gold is likely to extend its downward trend to $1,000 per ounce as the US Federal Reserves is determined to raise interest rates within the year. This move will strengthen the already dominant US dollar and diminish the attractiveness of gold.

Victor Thianpiriya, commodities analyst from ANZ, has also cast a dark outlook on gold prospects in a recent report. According to the analyst, softer jewellery demand from China and India as well as positive developments on the Greek crisis will drive gold prices further down in the near future.

Other reasons for the unpopularity of gold, according to financial expert Nguyen Tri Hieu, include discouragement from the government and a little “wave” of speculation.

“After the economic downturn, the State Bank of Vietnam has strongly discouraged citizens from using gold as a tool for business transactions, investment and hoarding. Subjected to tight regulations, domestic gold prices have not experienced any large price fluctuations, making it difficult to speculate. The recent tumble will further discourage gold investors and prompt a switch to other investment tools,” Hieu told VIR.

Another gold expert predicted that as prices continue to fall, individuals and institutions will sell their gold inventories, while buyers will likely lower their bidding prices to minimise risks.

“Although mass selling has not occurred yet, unlike in previous years, many owners have already sold their gold in an effort to reduce losses. This may put further pressure on domestic gold prices,” he noted.

Economist Vu Dinh Anh advised gold owners to remain calm during the price crisis and avoid being exploited by speculators. The economist maintained that on the long run gold still holds its merits and will continue being a safe investment channel, especially during economic troubles.