Investors turn away as gold loses its sheen

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Investors turn away as gold loses its sheen

Vietnam News - 7/28/2015 10:58:48 AM

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Do not tough gold" is advice that many experts are giving Vietnamese investors amid a relentless fall in the prices of the metal both here and globally.

July 16 was an unusual day for gold prices as they changed 50 times on jewellers' electronic signboards and ended up nearly VND1 million ($45.7) lower.

A tael, or 37.5 grammes, of State-owned SJC's gold closed at VND33 million (US$1.511.3), though international prices fell by only VND100,000 per tael.

Analysts said that this precipitous drop was also a rare phenomenon in Viet Nam.

But there was little increase in buying.

Usually, considering gold is one of the most popular and stable asset classes in Viet Nam, demand for it has an inverse relationship with prices.

But this time, though prices fell off the cliff, buying accounted for only 30 per cent of gold shops' transactions.

Analysts have attributed the sharp drop in the prices of the precious metal to several reasons, but say the main cause is the US's reiteration that interest rates are likely to rise this year, which will push up the value of the greenback.

Many others believe however that the reasons for Vietnamese prices falling 10 times higher than global rates are domestic.

The Vietnamese people's habit of parking their savings in gold has shrunk significantly, dragging down demand, since the central bank adopted several measures to reduce speculation in and the use of gold.

After falling for a week, both the global and domestic prices have picked up slightly since July 20. In fact, on that day prices were up by 200,000 per tael to VND33.15 million ($1,520).

Again, the recovery did not cause any increase in demand.

Analysts attributed this to the fact that gold has somewhat lost its sheen since Viet Nam's economy is looking up, improving people's trust in the dong as well as economic prospects.

In the first half of the year the country's GDP grew at the fastest rate in five years, inflation remained low and the exchange rate was stable.

Banks are paying reasonable interest on deposits in real terms considering inflation is low.

The property market is showing definite signs of recovery after many years and the stock market is headed for multi-year highs to take the shine off gold.

Hence the analysts' exhortation.

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