Vietnamese investors switch from gold to bank deposits, securities

Fall in the value of gold in Vietnam

The discrepancy between domestic gold prices and those of the international market is closing, dampening the demand in Vietnam.

In the middle of this week, the Vietnamese gold market saw prices plunge. Fewer transactions were conducted at gold shops along Tran Nhan Tong Street in Hanoi, famous for its gold trading.

When prices climbed to VND48 million-VND49 million ($2,299 - $2,347) per tael, buyers accounted for 90% of those who were trading. Now, however, sellers outnumber buyers about 2 to 1.

According to Hanoi-based Bao Tin Minh Chau Jewellery Company, on February 28, 70% of their clients wanted to sell.

Meanwhile, Sacombank Jewellery Co (SBJ) said investor bought between 200 and 300 taels, and sold around 500-600 taels.

Dr. Nguyen Van Thuan, head of HCM City Open University’s Banking Faculty, said, “It’s not that people have turned their backs on gold. There is a continuing demand, but the rebounding securities market is becoming more attractive to investors."

Economist Nguyen Minh Phong said that the narrowing difference between domestic and the world gold prices is what is discouraging people from speculation.

Nguyen Cong Tuong head of Sai Gon Jewellery Co (SJC)’s Business Department, said many would-be gold investors are waiting to make out what the domestic price trend will be, as prices on the international market have been more or less stable.

An anonymous official of another gold firm said that demand is often lower in the beginning of the year and only reaches its peak in the final months, from August through the end of the fourth quarter.

“Many people are rushing to sell their gold in order to deposit their money in banks at high interest rates,” he noted.

Nguyen Van Thuan suggested that if the State Bank of Vietnam applies methods to mobilise gold in the time to come, it could heighten its capacity to stabilise the market when needed.

An official of a gold trading firm, however, believes that a situation like last August's "gold fever" is highly unlikely because the foreign exchange rate will probably not increase as sharply as last year.

Concerning the world gold market in 2012, he forecast that prices will continue to rise considerably in the first quarter and then slow down between May and June, before reaching a high in the third quarter.