Gold trading season begins quietly

Gold purchases remains low, even though the trading season has begun. People are avoiding gold while prices are overly high and many have turned to hoarding dollars.

After reaching its highest peak at 29 million dong per tael in November 2009, the gold price slid to 26.39 dong per tael on January 22, 2010. Since the price is still much higher than 2008’s, no one can say for sure what will happen, so hoarding gold is no longer the choice of many people.

Jewelry gold selling well, bar gold slowly

According to Nguyen Cong Tuong, a senior executive of Saigon Jewelry Company (SJC), the trading volume is now equal to 1/3 that of peak days, about 4,000 taels daily. Commercial banks remain the main buyers, while individuals remain cautious about gold investments and are even trying to sell gold for fear that the price will drop further.

Nguyen Thi Cuc, Deputy General Director of Phu Nhuan Jewelry Company (PNJ), revealed that people are mostly purchasing jewelry gold, worth 2-3 million dong per product, but rarely buy bar gold.

SJC also noted that purchases of bar gold as an asset is very weak. Truong remarked that the number of enterprises processing material gold into SJC bar gold has decreased considerably. As the market is too lackluster, businesses are not accepting gold for resale.

High risks for gold investments

One banker maintained that it is too risky to preserve assets through gold, because the gold prices have been fluctuating so heavily. The gold price dropped by nearly 4.4 percent just within the last three days and by 10 percent in the last two months. The decreases are much more dramatic than dong/dollar fluctuations.

Several months ago, forecasters predicted that gold prices would continue rising and, just one year ago, people talked much about the “collapse” of the dollar. Now investors in the world want to keep dollars rather than gold. The recovery of the dollar is threatening gold prices.

Tuoi Tre newspaper quoted a banker as saying that, due to unprofitable investment deals, the borrowing of gold for speculation has dropped by 9/10.

Commercial banks are also not buying bar gold to prepare for gold account closures as expected. Because the world’s price has been decreasing (the price lost $50 per ounce in value) and due to the shortage of dong capital, banks have been forced to limit their gold purchases.

VietNamNet/TT

Tags: Vietnam gold market