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Living with gold in Vietnam
First installment: The ups and downs of betting on gold
Holding paper gold when you’re leveraged to the hilt can be a nerve-wracking experience. Just ask any futures gambler at Vietnam’s gold exchanges.
Unlike the stock market, the officially banned gold futures market fluctuates second by second, delivering windfall profits or wiping out entire investments in next to no time.
A contract buyer only needs to fork out seven percent of the money as a bank guarantees the rest. Of course, if he wants to take delivery of the actual metal then the bank must first be paid in full.
“Two years ago, when the stock market turned bearish, I cashed out for VND5 billion (US$280,324) and put the money into gold, as the returns can be attractive,” said Quang, a keen punter at the VGB gold exchange in Ho Chi Minh City.
“Here you can buy a contract for 700 gold taels for VND1 billion ($56,064) whereas it would cost VND13.6 billion ($762,481) to purchase the actual metal from a gold shop at today’s rate,” he said (a tael equals a bit over 1.2 troy oz.).
“I traded big in the first few days. Once, in just one day, I made VND480 million from trading 600 taels. Then another day came along when I was pretty panicky after losing VND1 billion from trading 3,000 taels,” Quang recalled.
Nam is another enthusiastic punter who spends most of his time at VGB.
He bought 50 taels at VND19.452 million a tael on March 17 in the hope that gold’s next move would be up. Ten minutes later, he had a profit of VND1.05 million when the price increased to VND19.473 million.
Nam then bought another 50 taels at VND19.473 million a tael but lost VND650,000 in the next 20 minutes as gold fell to VND19.461 million.
Thanh Nien even heard of a trader who had made VND20 billion in January but had gone on to lose VND30 billion in February.
As is obvious from the margin rate, it only takes a swing of one percent in the price of gold to generate a profit or loss of 14 percent or thereabouts, so a swing of seven percent will either double or obliterate an initial cash outlay.
When they’re betting on gold, traders need to keep a close eye on the international spot price as the domestic price tracks it closely.
They must also stay abreast of global news that might affect the gold price, even if that means hiring an interpreter, as quite a few of them do.
Thanh Xuan
Thanh nien
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