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Gold Market Review 2009   2009-12-28 - VietNamNet/TBKTVN

Gold prices for 2009 broke records continuously, climbing to their highest level in history.


The decision to allow gold imports, released on November 11, successfully cooled the market.

Here are the nine most outstanding features of the gold market from Thoi Bao Kinh Te Vietnam.


Record-setting year


The gold price increased steadily in the first, second and third quarters and then soared in the fourth.


Beginning the year at $880 per ounce, the gold price increased by 24 percent as of December 23, closing at $1,090. Gold reached its highest peak on December 2, 2009, at $1,215.8 per ounce, far higher than the closing price of 2008 at $1,002.8.


Paralleling the world’s prices, domestic gold prices have also been breaking records. The “historic day” of the domestic gold market was November 11, when the gold price climbed to 27 million dong, 28 million and then 29 million dong in just a few hours.


Gold stood at 18 million dong per tael earlier this year, soaring to 26.5 million dong per tael as of December 24. As such, the price has increased by 8.5 million dong per tael, or 47 percent, over last year.


Shelter from the storm?


The world’s gold price continues rising even as the financial crisis has become less serious and high inflation is no longer a major worry of most large nations.


Gold is not considered the “safest shelter” to use in “financial storms” any more. The greenback has now become the first choice of people seeking a safe outlet.


The gold price has been supported by loosened monetary and fiscal policies of the US this year. The US FED maintains the prime rate at record low levels has been the strongest support for gold prices.


Banking gold


Reducing dollar reserves in favor of gold has become the choice of many central banks in the world, especially newly emerging economies in China, Russia, India and Brazil.


India purchased 200 tons, Sri Lanka bought 10 tons and Mauritius gained two tons from the 403 tons of gold sold by IMF. India, China and Russia are potential buyers for the remaining volume.


Middle East shocker


In early October, the public was stunned by information that Gulf countries quietly planned to weed out the dollar from oil transactions. This was later denied, but the rumor was enough to force the dollar down and raise gold prices.


Then, in late November, the market was shocked once again by information that Dubai World would fall into insolvency. This prompted investors to return to US bonds and dollars, thus raising dollar prices and sending gold down.


Gold becomes high profitable investment channel


The domestic gold price increased by half so far this year. The VN Index of Vietnam’s stocks has increased by 51.8 percent and depositors receive an interest rate of eight percent if they made a one-year term deposit at the beginning of the year.


Big gaps between domestic and world gold prices always exist


Generally, the domestic gold price follows in accordance with the world’s price. Yet the domestic price is influenced by supply and demand as well as the dong/dollar exchange rate. Thus, it was sometimes lower or higher by one million dong per tael compared with the world’s price.


On November 11, when domestic gold broke previous records, it stood above the world price by 3.6 million dong per tael.


Costly game of “follow the leader”


Small investors tend to follow the moves of larger investors when deciding to purchase or sell gold.


In the second and third quarters, many investors borrowed and sold gold, hoping that the gold price would drop later when they would need to purchase gold to repay bank debts, and also gain a fat profit.


However, the gold price did not go down as expected, but continued to escalate. As the result, in the fourth quarter, people rushed to purchase gold to pay debts at high prices. The massive purchase of gold led to sharp price increases. A lot of other people, who had not borrowed gold and did not need to buy gold for debt repayment, also ran out of patience and rushed to purchase gold for fear that the prices would go up further.


Timely intervention by State Bank of Vietnam


As the gold market heated up in November, the State Bank of Vietnam decided to allow gold imports after 1.5 years of interruption. The decision, released on November 11, successfully cooled the market.


Gold management


The Government has emphasized the need to control gold trading floors. They have suggested two options: stop the operation of gold trading floors or require 100 percent collateral. Both solutions face strong opposition from experts and gold exchanges.


Other news

Too early to tax gold investors?   2009-12-22

Gold dives below VND27 million a tael   2009-12-13

Local gold prices track global slide   2009-12-10

Gold price continues to rise sharply   2009-11-23

Gold uncertain, pessimism on stocks unwarranted   2009-11-23

Gold price continues to rise sharply   2009-11-23

Gold reaches record high prices in Vietnam   2009-10-15

Gold jumps to 18-month high on weaker dollar, inflation outlook   2009-09-13

Banks raise gold rates to attract deposits   2009-09-13

Local gold breaks VND22 million   2009-09-09

Gold climbs to VND21.37 million a tael   2009-08-05

Gold prices down, purchases up   2009-07-07

Vietnam gold prices up slightly   2009-07-03

Gold trading floor is playing field of banks only?   2009-07-02