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Gold, dollar prices plunge, people deposit money in banks
It is very difficult to decide where to put money nowadays as gold and dollar prices are on the decrease while bank deposit interest rates are decreasing slightly. Most people still prefer depositing money in banks.
Gold promises attractive opportunities
At 5 pm on August 11, SJC gold was sold at VND17.75mil/tael, while the world’s gold price was $862/oz. As such, since August 4, the gold price has dropped by $50/oz, while the domestic price has dropped by VND900,000/tael.
Phi Nhung, an investor in ward 2, Phu Nhuan district in HCM City, wanted to buy 30 taels of gold and asked the director of a gold import company for advice. The director said that if investors hold gold for three months they would get profit as the gold demand always increases towards the year’s end. Meanwhile, gold import companies do not have quotas for importing gold; therefore, the supply will be short at that time.
However, the director said that it is not very likely that the gold price on the world’s market will return to the record high of $1.030/oz and the domestic price will again reach VND19.45mil/tael.
In fact, it is highly possible that in November 2008, the US Federal Reserve will raise the interest rate from 2% to 2.5%. If so, the dollar will revaluate against other hard foreign currencies. The world’s gold price will decrease as the gold price always goes the opposite way as the dollar price. This would mean that the domestic gold price would also decrease.
Few opportunities with foreign currencies
The VND/US$ exchange rate has dropped to VND16,450/US$1, a decrease of VND3,000/US$1 over mid June 2008. A lot of commercial banks have slashed US$ interest rates as US$ mobilised capital has increased by 10%.
The state is trying to limit imports, especially gold imports, in order to reduce the trade gap and ensure enough foreign currencies to import essential goods. Moreover, the strict regulations on foreign currency exchange agents, valid as of August 2008, have been making foreign currency speculators pull back.
Therefore, the demand for foreign currencies is not increasing. It is expected that overseas remittance via the banking system will reach $8bil this year. Commercial banks now do not have a demand to buy dollars from the State Bank, which shows that their supplies are now profuse.
All the said factors show that investors do not have a lot of business opportunities with dollars.
Bank deposits will definitely bring profit
Bank deposit interest rates are now on the decrease, but people believe that the rates will not drop sharply, but only slightly by 1%, which means that the interest rates will be around 1.45%/month, or 17.5% per annum.
With the capital of VND350mil, depositors will earn the profit of VND5mil a month. For the same amount of money, investors will be able to purchase 20 taels of gold, but it is not certain that the gold price will increase by VND250,000/tael/month.
As such, depositing money at banks remains the first choice of many people who have idle money. However, brave investors would choose to inject money in gold and dollars as they think the investment channels can bring higher profit, though the risks of the gold and dollar price decreases are always hanging over them.
VNN
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