The spiral of the gold fever

Gold is really the big resources for the national economy. However, when the gold market becomes unstable, gold could be a hard pressure on the national economy.

Gold can be both resources and pressure

On the two days when the gold price hit its peak, the gold market was scorching hot and chaotic, when people jostled to purchase gold for fear that the gold price would increase further. There have been no official statistics about the number of buyers and sellers, but some gold shops reported the traded volume of 3000-5000 taels per day, while bigger shops tens of thousands of taels per day.

It is clear that a huge amount of money has been rotating in the national economy through gold transactions. All the people’s attention these days has been driven to the gold market, while the prices of goods have also gone up and down in accordance with the gold prices.

When a huge amount of money is poured into the market not for the purpose of maintaining production and business, this would cause long term consequences.

Gold exports, which was once the factor which helped reduce the trade deficit, has turned out to be the factor that causes uncertainties to the national economy.

It is estimated that about 700-1000 tons of gold is being kept among people, a huge amount of assets which has been accumulated for the last many years. However, experts have pointed out that the resources have been “frozen”, because gold is being kept in the coffers at every family. Every time, when the gold price fluctuates, gold is put into trade for profits.

As such, though everyone well knows that gold could be the big resources, the resources still cannot be exploited due to the lack of a proper mechanism.

The State Bank of Vietnam is drafting a government decree on gold management. However, the drafts have discouraged people and experts,, because they cannot show any new solutions to the gold market management. No proper solution to exploit the resources and prevent the price sway has been found.

A thing which has been repeated that in the last many years that when the gold prices increase dramatically, the State Bank hurries to allow to grant quotas to import gold to ease the domestic “fever attack”, and gets puzzled with the policies on imports restriction.

Importing gold and the side effects

The State Bank of Vietnam has officially allowed importing five tons of gold, the move that has not surprised any one. Right after the decision on allowing gold imports was released, the gold price has been easing. However, this does not mean that the gold fever attack has ended.

Experts have pointed out that the import gold would only arrive in Vietnam in one or two days, which will then be manipulated to be launched into the market. This would be a long period, where big price fluctuations can occur. Therefore, though having received the quota for gold imports, enterprises still need to consider their import plan.

Experts, on one hand, advocate the decision to allow importing gold, on the other hand, said that gold imports will not be able to settle the gold fever attack in the long term.

Meanwhile, gold imports would put a hard pressure on the trade deficit and the exchange rate. Right when the central bank decides to import five tons of gold, experts have warned that the gold imports would make the trade deficit become more serious, thus threatening the macroeconomic stability policy being pursued by the government.

Besides, in order to import gold, Vietnam will need a big volume of foreign currencies, which will certainly put a pressure on the exchange rate.

This explains why in the last two days, when the gold price escalated, the dollar price has also increased with the dollar price on the black market having exceeded the 21,000 dong per dollar threshold.

The stock market which has been withering because of the lack of the cash flow, may get absolutely exhausted, because investors have left the market for gold market. Meanwhile, Duong The Son, Director of Hoang Son Real Estate Corporation, has complained that when money all goes to the gold market, the real estate market may die. – Vietnamnet

Tags: vietnam gold, Vietnam gold market, Vietnam gold prices