Gold’s turn to shine this year

Gold or not

As the God of Wealth or the tenth day of the first lunar month draws near, the demand to buy gold among local residents has shot up, whilst prices are adjusted northward by gold merchants across the nation.

Relying on gold for a whole year of good luck is in fact a tradition followed by quite a number of Asian nations including Vietnam for years. However, could buying a tael of gold on this very day bring luck for the buyer?

“Buying gold for luck is purely a belief. For many, the strength of the belief may vary, with some buying foreign currencies or even Bitcoin for luck. We should note that if it held true, the God of Wealth would bring luck in terms of money, meaning money coming in. Buying gold means we are paying money for it. It is therefore not very rational,” said investment advisory manager Phan Dung Khanh from Maybank Kim Eng (MBKE) Securities in Ho Chi Minh City.

“The wheel of fortune in this case will reward gold sellers, not the buyers,” Khanh said.

Khanh told VIR that it would not be necessary to queue on the day to buy a piece of gold at an absurdly high price (plus the many other associated fees). Buying on the day would often result in a loss for the buyers, so it is no luck at all.

“Some have ventured to collect gold at lower prices during the days before the day of the God of Wealth, then sell on the day to make a profit, which may actually bring them luck,” he added.

Gold prices have started to edge up a couple of days before Sunday. At Hanoi-based Doji Gold and Gems Group (Doji), for instance, SJC gold has reached VND36.90-37.15 million ($1,677-1,688) per tael on Friday, and VND36.86-37.38 million ($1,667.2-1,699) a tael on Saturday.

On Caishen Day (the day of the God of Wealth), gold is in extremely high demand. Photo: Dung Minh

At Phu Nhuan Jewelry (PNJ), the increase in the price of SJC gold has been reported in the range of VND30,000-50,000 ($1.36-$2.27) on Friday.

According to Doji’s Gold Trading Division, precious metal prices in the international market, meanwhile, ranged between $1,328.68-1,328.95 per ounce on Saturday morning.

The difference between international and local gold prices, once converted to tael, have been reported at VND910,000 ($41.36) on Saturday and VND610,000 ($27.72) per tael on Friday.

The soaring demand for gold on the tenth day of the year is often said to be a result of a psychological factor and gold merchants taking advantage of an old myth to raise prices. Gold buyers, on the other hand, are not overly concerned about the prices when it comes to securing their luck for the year.

Sun to shine on gold?

The price of the precious metal in 2018 is expected to follow its 2017 momentum when prices edged up slightly.

According to Khanh from MBKE, since the end of 2017, the price of gold has started to move up amid the short bear markets in securities and real estate.

“Should this trend persist in 2018, there is a possibility that gold will shine once again after some seven years of hibernation,” Khanh said.

He added that this would particularly hold true as the price of Bitcoin is in a slump, which in turn could support the return of gold.

“Besides, if the dollar is not too strong and the pace of the Fed rate hikes is not too fast, gold will be further shored up. Otherwise, the price will stay quiet for the 8^th consecutive year,” Khanh said.

In addition, Khanh warns that macroeconomic factors should also be taken note of, as the US economy, the global economy, and the stock market could all go in a slump, inflation adds up, and bond yields soar. These usually channel money towards safe havens such as the Japanese yen, the Swiss franc, T-bills, and gold.

“Gold investors should consider these factors and the resistance at $1,400. If this test resistance for gold is reached, then gold prices will probably go into a long-term upswing.”

“Mid- to long-term investment in gold and reshuffling investment portfolios to swap some savings or real estate into gold for now will carry low risk as the gold price is in its low zone at present, since its peak in September 2011,” Khanh noted.

“Short-term investors intending to invest in gold will bear the higher risk as although the gold price fluctuates in a narrow range with strong margin, it would be easy to lose out for these investors without proper risk control. Or, if the gold remains calm for a bit longer, short-term investors will lose the opportunity to invest in other channels, such as the stock market which has soared some 48 per cent in 2017.”

According to the World Gold Council (WGC), in 2017, investors added gold to their portfolios as incomes increased, uncertainty loomed, and gold’s positive price momentum continued. As 2018 begins, key market trends such as synchronised global economic growth and frothy asset prices will support demand and maintain gold’s relevance as a strategic asset.

WGC said that over the long run, there are also four attributes that make gold attractive as a strategic investment, for it has been a source of return for investors’ portfolios and its correlation to major asset classes has been low in both expansionary and recessionary periods.

Additionally, it is a mainstream asset that is as liquid as other financial securities and has historically improved portfolio risk-adjusted returns.

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