Domestic gold traders exported more than 12 tons of gold in H1

It was last Saturday when Tuoi Tre found out that for the 1st time this year, domestic gold price has surpassed that of their international peer by VND700,000 a tael.

But it has not always been that way.

In the past months after the traditional Tet holiday (the Lunar New Year), there were leaks claiming that the central bank was working on a decree allowing gold selling but not gold buying.

Then, domestic gold price was around VND400,000-500,000 lower than the world price.

But on that Saturday, while the world gold price fell $15 an ounce, or around VND372,000 a tael – 1.2 troy ounces – to end last week’s trading session at $1,486.5 an ounce, the domestic gold price slid only some VND10,000 a tael to VND37.64 million, causing the VND700,000 price gap.

Gold traders told Tuoi Tre that the gap is due to strong buying power of institutional buyers.

Meanwhile, gold holders refused to sell out since many analysts had forecast that the recent downward trend of the world gold price was only a temporary phenomenon before it would regain.

Domestic gold sources are also running low after domestic gold traders exported more than 12 tons of gold in the form of jewelry in H1/2011, said a Tuoi Tre’s source.

One day earlier, Vnexpress reported that gold shops in the capital city of Hanoi begun to be warmed up with more buyers since the central bank’s rumored ban on gold trading has turned out to be wrong, and gold can still be traded freely at central bank’s appointed dealers and banks.

If inflation continues to rise until the end of this year, which is expected to hit 17-18 percent for this year, and around 25-26 percent year on year, along with dampened real estate and stock markets, for which almost all the capital channels have been tightened, gold will be the bright star for those with surplus money.

As we have mentioned in a previous story, Vietnam may face a surging trade gap and have to tackle other related uncertainties including unstable forex rate, gold speculation and psychological effects in the second half of this year.

The rising import of gold and other commodities will be a strain on the national forex reserve.

Foreign direct investment disbursement in the first six months of this year reached $5.3 billion, down 2 percent against the same period last year, Overseas Investment Department under the Ministry of Planning and Investment reported.

Overseas remittance is expected to reach $8.4 billion this year, up $400 million year on year, Reuters quoted the central bank’s data.

When we sell, they buy

Recent World Gold Council (WGC) data shows that there has been a reversal in the downward trend of central bank gold reserves since 2008, increasing by 2.2 percent from 29,870 tons in 2008 to 30,535 tons at the end of 2010, according to Qatar-based Peninsula newspaper.

This is mainly a result of the rising demand for gold from central banks with surplus liquidity in some emerging markets, such as China, India, Russia and oil producing countries in the Middle East region.

China’s gold reserves have increased by 167 percent from 395 tons in 2000 to 1,054 tons in 2010; and Saudi Arabia’s have increased by 126 percent to 323 tons.

Central banks in emerging markets with surplus liquidity have been purchasing more gold in an effort to diversify their reserve assets away from the leading reserve currencies, such as the US dollar and the euro.

This trend accelerated following the global financial crisis in 2008.

In 2010, gold replaced the euro as the second largest reserve asset in central banks around the world, after the US dollar.

In the aftermath of the financial crisis, worries have persisted about the US budget deficit and the extent of its public debt as well as the Eurozone sovereign debt crisis.

These concerns are unlikely to be resolved in the short term. Therefore, the emerging market central banks are likely to remain net buyers in the near future, QNB Capital told the Peninsula.

Gold has tended to be regarded as a safe haven by investors, offering protection in times of perceived heightened risk in global markets. Therefore, the global financial crisis encouraged central banks with surplus liquidity to increase their purchases of gold.

The growing demand for gold among central banks in emerging markets has contributed to driving gold prices ever higher. The price of gold has risen by 339 percent from an average of $279 in 2000 to an average of $1,225 in 2010.

The current record highs could lead to some slowdown in the growth of demand for gold, but overall, central banks are likely to continue increasing their reserves, according to QNB Capital.

Gold prices have also been driven higher by demand from the private investors and investment banks who are also attracted by the value of gold as a safe haven.

This trend has been supported by the growth of investment funds that offer exposure to commodities, especially physical gold. – Tuoitre

Tags: vietnam gold, Vietnam gold exports, Vietnam gold market