Gold Delisted from Import-export Goods: Better for Market

Gold treated as an imported commodity will increase the trade deficit while this move limits the free development of the gold market.

In the coming time, the Vietnam Gold Business Association will send recommendations to the State Bank of Vietnam to delist gold from the list of import and export goods and treat it as a special commodity. Dinh Nho Bang, General Secretary of the Vietnam Gold Business Association, said these recommendations were made as Vietnam has not recognised gold as a foreign currency when the world is seeing it as a hard currency. Other nations see gold reserve as an important currency reserve. The United States reported gold reserve amount to 64 % while the rate in Europe is above 50 %. Therefore, gold treated as an imported commodity in Vietnam will increase the trade deficit while this move limits the free development of the gold market.

If this recommendation is approved, does it mean gold import and export will be floated?

After the central bank allowed gold import after 18 months, the domestic gold prices got closer to the global rates. However, domestic gold prices are still higher than the world rates because the Government is still restricting gold import. If gold is not in the list of export and import goods, the floating import of gold will not affect the trade balance. And, of course, the domestic bullion price will be equal to the world rates.

Then, it is much easier to predict the price of the precious metal in the country because it will move in correlation with the world.

Global gold price has not set up a new trend since the start of this year although specialists previously forecast that the price in the uptrend.

According to the World Gold Council, in recent years, Vietnam imports an average of 50-60 tonnes each year to forge bullions and produce jewellery. Particularly, 80 % is used to make bullions and 20 % is used for jewellery.

The world gold price now depends greatly on signals from the US economy. By this time, the US dollar has not clearly strengthened while the US economy is reportedly witnessing a slowly recovery, not as fast as expected by experts. In addition, gold prices rise on limited supply while many central banks are silently buying. In late 2009, India purchased 200 tonnes of gold while China is searching to buy a large amount of gold in the early 2010. These are considered the most powerful leverages for the gold price to climb this year.

International experts predict that gold price will surpass the all-time high of US$1,226 per ounce last year but will not exceed US$1,350.

Why will gold not top the US$1,350 threshold while inflation may return and gold becomes a safe haven for investors?

The possibility of the return of inflation in the world is inevitable and this has been predicted amid growing amount of money injected into the market to revive the global economy. Once inflation is high, gold will bea safe shelter for people. However, technically, in 2010, the latest support of the precious metal is US$1,085 per ounce, the next support is US$1,050 and the US$1,000 threshold is considered the psychological resistance. The nearest resistance is US$1,165, the next is US$1,200 and the record resistance is US$1,220. Currently, the world gold price is fluctuating in the 1,050-1,150 territory while the trading margin is relatively stable. When the price of the precious metal moves out of this territory, the uptrend or downtrend of the gold will take shape.

According to the gold price cycle, the gold price usually falls in April; it means the uptrend of gold prices will only start in May.

The gold price is falling down at this time. In the short term, it may rise, but not high, because the purchasing power from the domestic market is not very strong. But, this is still an attractive investment channel because this is a traditional investment channel for the people. Especially now, for people with unemployed money, gold is a good choice for reserve as it is a safe heaven and a double-profit making good at bank. After a year at bank, investors will take the profit from banks and the margin gained from selling gold. Of course, the profitability is decided by price development and the time of gold purchase.

If the gold import and export is free, can it lead to the scarcity of foreign currencies on the market?

If the gold import and export is float, gold will be both imported and exported. In February, we also exported gold. In fact, the foreign exchange market was better and there was no scarcity of foreign currencies caused by gold import and export.

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