Gold price plunge makes investors puzzled

April 26, 2013 | 16:57
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After the world’s gold price tumble and the heavy fluctuations of the domestic prices, the belief that gold is a safe shelter in the storm has become shaky.

Vietnam, gold market, price gap, SBV, management, decree

The gold price remains unpredictable even after the last consecutive auctions organized by the State Bank of Vietnam through which 11 tons of gold have been put into circulation. Bullion gold keepers now feel worried when seeing the gap between the domestic and international prices getting widened despite the central bank’s efforts to increase the market supply.

Gold glitters no more 

The State Bank on April 23 put another 26,000 taels, or 1 ton of gold, into auction, at the starting price of VND41.97 million per tael, or VND200,000 per tael higher than the buying price and VND200,000 per tael lower than the selling price quoted by gold companies at the same time.

All the 1 ton of gold was sold out at the prices of VND42.02 million per tael at the lowest and VND42.12 million per tael at the highest.

To date, the State Bank has put 328,000 taels of gold into auction, while having sold 289,400 taels, or 11.1 tons of gold. The buyers are mainly the commercial banks which need to gold to finalize their accounts prior to June 30, 2013 as requested by the State Bank.

After the bid, the SJC brand gold once climbed to VND42.2 million per tael, but then slightly decrease later in the afternoon. The margin between the selling and buying price was up to VND300,000 per tael. The gap between the domestic and international prices on the same day was VND6.2 million per tael.

The unpredictable international price performance plus the overly big domestic price gap both have made the investors hesitate to make transactions. 

A senior executive of Bao Tin Minh Chau, a well known brand in Hanoi, said that the market was very quiet earlier this week since people expected to see the clear tendency of the gold price. The market has got more bustling later, but there have still been less transactions than in normal days.

Meanwhile, the head of the business division of a gold company has noted that most of the sellers sell gold because they fear they prices would drop further, while most of the buyers buy gold to make payment for goods and services, or pay debts. This shows that people now do not try to keep gold as a kind of assets any more.

Nguyen Mai Hoa, who sold gold to Phu Quy gold shop, said she feels that she is facing high risks because the gap between the domestic and the international prices has been unceasingly increasing.

“Gold companies always pay low when buying gold from the public, while they always charge very high when selling gold to people,” she noted.

Making deposits instead of keeping gold

Investors now feel puzzled about where they should inject money in. Many of the investors still believed that keeping gold was the best solution until they saw the price chaos recently. 

The real estate market remains frozen, despite the noisy arguments among state management agencies and economists about the policies to revive the market. Since the liquidity is too weak, it is clearly not a good choice to pour money into the real estate sector.

A report showed that the cash flow to the stock market has slowed down with the average trading volume in March on the HCM City bourse reaching 49.39 million units only per trading session, down by 35 percent over February with 76 million units, and 40 percent over January.

In Hanoi, the trading volume decreased by 42 percent and 50 percent in March over February and January, while the trading value decreased by 45 and 46 percent, respectively. Dollar trading will not bring profits since the exchange rate keeps stable.

Therefore, depositing money at banks remains a big choice for investors, which explains why the mobilized capital has increased by 3.86 percent.


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