Aug 25: Vietnam gold free falls to vnd45.3mln/tael, dollar stable

Vietnam gold today fell freely at the open to VND45.5 million/tael following global biggest single day fall in 31 years of over $100/ounce. However, domestic gold is still trading at a premium to world gold prices while dollar is stable.

As of 8:30 Hanoi time, Sacombank-SBJ gold was listed at VND45.21 million/tael and VND45.49 million/tael for bid and ask, respectively, falling VND2.2 million a tael from yesterday morning.

SJC in Ho Chi Minh City was listed at VND45.15 million/tael and VND45.55 million/tael for bid and ask, respectively falling VND2.1 million a tael from yesterday morning.

Despite a plunge of over VND2 million/tael a day, local gold prices are still $50/ounce premium to the global ones.

Central bank and big local gold traders have been working together in an effort to reduce the premium and to get price parity between the two markets.

Global markets: Gold Has Worst Day in 31 Months, CME Margin Raising Weighed

Gold plunged below $1,800, a dramatic reversal from a record-setting run that bred complacency about the yellow metal’s risks.

Gold futures ended the regular session down by $104, or 5.6%, at $1,757.30 an ounce for the most-active contract, the biggest price drop since Jan. 22, 1980.

Spot gold was down 4.1% to $1,754.59 an ounce by 3:37 p.m. EDT (1937 GMT), off its session low of $1,749.39.

COMEX futures volume topped 430,000 lots, on pace to surpass a record from Aug. 9, preliminary Reuters data showed.

The CME Group on Wednesday raised maintenance margins for trading COMEX 100-ounce gold futures by 27%, effective after the close of business on Aug 25.

The exchange operator raised maintenance margins on gold futures for speculators to $7,000 per contract from $5,500.

On Aug 10, the CME raised gold futures trading margins by 22%to $5,500 per contract.

For some market participants, gold’s dramatic run-up and steep losses are reminiscent of silver’s 27% declines notched in early May.

SPDR Holdings Have Biggest One-Day Drop Since Jan 2011

SPDR Gold Trust (GLD) said on Wednesday its holdings fell 2.2 pct, in its biggest one-day drop in seven months,

The holdings of the world’s largest gold-backed exchange-traded fund dropped to 1,232.3 tons by the end of Wednesday’s trading session from 1,259.57 tons on Tuesday

Also this week the biggest gold exchange-traded fund, SPDR Gold Trust (GLD) surpassed the SPDR S&P500 index ETF (SPY) in market capitalization on Aug. 19. Even though the GLD surpassed SPY in market cap, total tonnage of gold allocated to the GLD was still under the record set in June 2010.

Insiders’ View

“Corrections are inevitable. The market moved too far, too fast. It got frenzied,” said Frank Lesh, broker and futures analyst with FuturePath Trading.

“We all knew it was coming, it was really a matter of when,” said Phil Streible, senior market strategist at MFGlobal. “In 10 days prices went from $1,700 to $1,900.”

“We exited one third of our gold position yesterday, and in retrospect we should have exited 150 percent of our long position,” Dennis Gartman, an economist and the editor of the Gartman Letter, wrote yesterday in his daily report. “The biggest news of all, in our opinion, was that the capitalization of the” gold fund had surpassed the equity ETF.

Several analysts said it’s possible that gold could fall to the $1,730s area, which is the level where gold began its last leg up. Streible said gold prices could consolidate at the current prices.

Frank Lesh, broker and futures analyst with FuturePath Trading said beyond $1,730, support is around $1,650, but he wasn’t sure if the market would fall that far. How the market closes on Friday will be important for the larger trend.

“If I was a bull, I’d like to see gold hold above $1,730. If it doesn’t, that will be a weekly reversal. That’s a big reversal and it would cause technical chart damage at that point,” he said.

Local dollar prices Stable

Vietnam’s central bank kept the U.S. dollar’s exchange rate to VND20,628 unchanged from yesterday. While local banks mostly kept their dollar price quote unchanged. – Source: Stoxplus.com

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