What is behind soaring gold prices?

Gold prices in the world market have sharply increased over the past few days, leading to a spike in the domestic market.

After hovering around VND37,5 – 38 million per teal in three months despite fluctuations in the world market, the price of domestic gold keeps going up by VND120,000-300,000, even VND460,000 per teal, to reach a record high of VND39.6-39.7 million per teal at the moment.

As it is still VND500,000 lower than in the world market, many businesses are keen to purchase more gold for export.

This is the first time in four months domestic gold follows the upward trend in the world market.

The gold fevers in late 2009, late 2010 and early 2011 were allegedly caused by speculators. The World Gold Council estimates that Vietnam has as plenty as 1,000 tonnes of gold kept by individuals.

When the government issued Resolution 11 embracing measures to curb inflation, one of which is tightening the management of trading in gold bars in the market, gold prices remained almost unchanged in the country. No wonder the draft decree on gold market management which allows for gold bar trading in licensed stores now appears to be easing worries among businesses and people.

It is expected to put gold trading back on the right track and prevent phantom gold fevers looming large as in the past.

The rise in global gold prices in part shows that not only people but also investors, funds, and banks, especially central banks, in several countries, tend to invest more in gold, a representative of the Vietnam Gold Association argues.

However, other experts describe this as a Band-Aid solution when the soaring price of gold in the world market is psychologically affecting people’s decision to purchase gold for reserve and speculation at that.

Many investors consider gold a safe shelter from the storm when major economies like the US and China are experiencing unstable growth on the back of the weak US dollar, and when the US Federal Reserve is ready to prime the pump for economic recovery.

Dr. Cao Sy Kiem, former Governor of the State Bank of Vietnam, says domestic gold prices are likely to keep up with global gold prices.

Judging from the low purchasing power in the domestic market, businesses are planning on gold exports. – VOV

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