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Gold rises as investors flee stocks hammered by financial crisis
Surging gold prices made Thursday a day for selling, not buying, gold. Customers survey the offerings at a gold shop in Ho Chi Minh City’s Le Loi Boulevard Thursday.
Vietnamese investors, frightened by the turmoil on international stock markets, stampeded gold exchanges Thursday, pushing the price 6.2 percent higher, as record amounts of the precious metal were traded.
On international markets, gold extended its biggest jump in 26 years after about US$3.6 trillion of market value was wiped from global stock markets within a week. Investors are buying gold, considered a traditional safe haven in times of financial uncertainty.
The precious metal soared $90 an ounce on Wednesday, its biggest one-day dollar rise in history. Thursday, the precious metal rose a further 2 percent in New York to $862.70 an ounce.
In HCMC, the price of gold at Saigon Jewelry Company (SJC), the country’s largest gold trader, Thursday rose as high as VND18.3 million a tael, or $922 an ounce. At the close of trade Thursday, gold at SJC was up VND1 million at VND17.98 million per tael, or $906 an ounce, below the March 17 year high of $983.
SJC reported it bought an all-time record of around 23,000 taels from customers Thursday. At the Saigon Gold Exchange, more than 657 taels were traded by 8 p.m., compared with Monday’s 380 taels, Tuesday’s 400 and Wednesday’s 367.
Nam, a customer at SJC, said he cashed in 100 gold taels he had bought at VND16,850 per tael couple of days ago, making a profit of more than VND100 million ($5,967).
The price of the yellow metal at Hanoi gold trading firm Bao Tin Minh Chau also climbed to VND18.3 million a tael in the morning before dropping to VND17.8 million a tael, or $897 an ounce, at 5 p.m. Most other gold shops in the capital reported heavy selling Thursday by customers seeking profit.
“The rise in the domestic gold price mainly came in the wake of a rally in international gold prices,” said an official at HCMC’s Phuong Nam Jewelry Company, who wished to remain unnamed. “The international price surged over the US financial turmoil.”
Global share markets have been in turmoil this week, after the US government was forced to bail out insurance giant AIG only days after the dramatic collapse of US investment bank Lehman Brothers and the sale of Merrill Lynch to the Bank of America. The US government has also stepped in to rescue US mortgage firms Fannie Mae and Freddie Mac.
Huynh Trung Khanh, a consultant in Vietnam for the World Gold Council, said the surge in the domestic gold prices had narrowed the gap between the local price and the international price. The gold price in Vietnam usually trades about $50 an ounce higher than the international gold price, a trend which can encourage gold smuggling.
Khanh predicted the local price of gold would soar to $1,000 an ounce by the end of the year as demand continued to rise. However, he said predicting the gold price over the next few days was difficult.
All over the world, investors were seeking security as central banks poured fresh liquidity into slumping money markets, according to Reuters. Central banks, including the US Federal Reserve, the European Central Bank and the Bank of Japan, Thursday threw more than $300 billion into the fight against the credit crisis.
“What is left for people to put their money in?” Afshin Nabavi, head of trading at MKS Finance, asked. “They can’t trust the banks, they can’t trust insurance companies, they can’t trust the stock markets.”
Gold is one of the few trustworthy assets left, he said.
International mayhem
“The central bank action has served to ease some stresses in the interbank market,” said Calyon metals analyst Robin Bhar.
On foreign exchange markets, the euro extended its climb against the dollar and was up more than 1.2 percent as financial market jitters undermined sentiment, boosting buying of gold as a currency hedge.
Traders are awaiting the opening of the US markets for clues to the future direction of trade, with further losses among banking stocks likely to boost gold.
“We could potentially push through $900 if the Dow cracks and people look for a safe haven,” said Bhar.
Banks are now running scared of lending to each other, analysts said, and risk aversion is rife.
“We believe this is an indication of the high degree of investor risk aversion in current market conditions – which should ultimately support fund flows into precious metals,” said Manqoba Madinane, an analyst at Standard Bank.
Thanhnien
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