Gold prices to climb as investors seek safe haven

People buy gold at a gold store in Nguyen Cong Tru street, Ha Tinh Province. - VNA/VNS Photo Hoang Nga

Gold prices have surged in the last three and a half months from US$1,201.40 an ounce on November 13, 2018 to a 10-month high of $1,347.90 an ounce on Wednesday.

The cause of this strengthening is attributed to a weaker US dollar as investors across global markets are worried about the uncertainty of economic and geographical conditions.

Among those are the pressure on the US Fed to increase lending rates, a no-deal Brexit, political instability in France, and the US-China trade tensions.

Forecasts for further increases have encouraged capital to flow into gold, making it a “safe haven” instead of stocks and other assets.

The gold market is forecast to continue shining in 2019 as investors may have fewer options regarding lower lending rates as central banks extend their stimulus packages, a slowing-down global economy and the possibility of another global recession.

According to financial expert Bui Quang Tin, when the Fed signals it would loosen rate hikes, the US dollar would weaken on the global currency market and boost gold prices.

In the past, when the Fed revealed its plans to raise interest rates, it made the dollar stronger against other major currencies, thus tackling gold prices.

However, there were still some uncertain factors for gold prices this year, Tin said, as cited by baodautu.vn, adding gold price may go up by 5-10 per cent from the current level and there would be fewer “waves” during the year.

According to Tran Thanh Hai, chairman of the Vietnam Gold Investment and Trading JSC, gold prices can reach between $1,350-1,400 an ounce this year.

But there are things that investors should take into account before getting into gold.

Tin said investors must understand how much risk-appetite there could be and distribute their resources reasonably.

He also urged investors to improve their knowledge about international gold markets to find their way in domestic gold as the two markets were closely connected.

“Gold prices have changed little in recent years. From 2004, they have risen by an average 8.6 per cent each year – equal to bank saving interest,” Tin said. “However, buying gold is not the same as saving money in banks as gold trading may come with high liquidity but also hinder investor confidence for its potential risks.”

In addition, VGB chairman Hai warned of the Government’s Decree 24/2012/ND-CP on tightening the gold spot market, which may stabilise domestic price and make it difficult for investors to hope for strong increases in the domestic market.

Under the decree, local gold companies were unable to import or export gold products, so the domestic market could lose its connection with global markets, thus, investors may find it hard to earn profits and even suffer losses, he said.