Vietnam witnessing “gold industry crisis”?

The gold prices have continuously broken records and made new records in recent days, which has driven speculators crazy and made people bewildered, brought fat profits to some finance groups, and pushed other enterprises against the wall.

Thoi bao Kinh te Vietnam has quoted its sources as saying “that the gold price by December 2010 had increased by 7.3 times in comparison with December 2000,” far exceeding the consumer price index (CPI) increase (2.2 times), the dollar price increase (1.4 times), the VN Index (2.35 times), real estate price (7 times) and deposit interest rate (2 times).

The first months of 2011 saw the prices in stability with the prices down by 0.5 percent in January, by 0.35 percent in February, up by 5 percent in March (due to the sharp dollar price increase), then down again in April by 1.2 percent, up by 1.43 percent in May, up by 0.36 percent in June and by 0.87 percent in July.

In total, the gold price has increased by 6.1 percent so far this year. The gold price stability has been explained by the stability of the dollar market: the dollar price has increased by 0.06 percent only in the last seven months (the prices went down in five months and went up in two months).

Therefore, no one could imagine that the gold price would skyrocket from mid July, continuously reaching the new highs. The price surpassed the 40 million dong per tael threshold on July 30. In the latest news, cafe.vn has reported that the SJC gold price climbed to 41.24-41.37 million dong per tael in the afternoon of August 4. As such, just after one day, the gold price soared by 400,000 dong per tael.

A tael is equal to 1.2 oz.

The gold price upward has raise controversial tendencies. At first, when the gold price began increasing, people rushed to sell gold to make profits, believing that the prices would not go up any further. Later, when witnessing the prices to continue skyrocketing, they have stopped all trade activities, keeping the wait-and-see attitude.

The big gold shops on Tran Nhan Tong Street in Hanoi have been always full of visitors these days. However, they only come to listen for the news, while they do not make transactions. The scenario is quite different from that of some days ago, when buyers had to queue up for their turn to sell gold.

The too rapidly changing gold prices have even made the investors, who “surf on gold prices” hesitate to purchase and sell gold at this moment.

Meanwhile, General Director of Bao Tin Minh Chau, the biggest gold company in Hanoi has said on Dien dan doanh nghiep, that a “gold industry crisis” is occurring in Vietnam

He said that the heaped up difficulties have pushed a lot of enterprises to the verge of bankruptcy, and that the market now needs the intervention of state management agencies to make the competition healthier.

“The gold trade and the gold market have fallen into a serious crisis when it is being controlled by some big finance groups and gold companies,” he said.

When the gold prices increase, some finance groups and companies spend big sums of money to collect gold, leading to the gold short supply and the sharp price increases. This causes “virtual profit and actual profit” to gold enterprises, while people have to buy gold dear.

When the prices begin decreasing, the groups and companies sell gold out to take profits, forcing other enterprises to bargain away gold and incur loss.

A lot of gold companies have been burdened with difficulties, when the receipts are not big enough to cover expenses. In the past, when the gold price stayed at 5 million dong per tael, the margin between the sale and the purchase prices was 100,000 dong per tael, or the profit was 1-2 percent of the turnover. Meanwhile, the gross profit has dropped by 10 times to 0.3 percent of the turnover, despite the increasing production costs. – Vietnamnet

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