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People turning backs on gold
A gold trading company which has a 17,000-18,000 tael-per day production line said that the workers of the company have been sitting idle since the end of 2008 as there have been very few gold buyers.
Gold trading companies all say that people have changed their way of thinking about keeping gold. As a result, people now rush to sell gold when prices increase instead of rushing to purchase like they did in the past.
There are only sellers
Many gold shops said that in the last four months, there have always been more sellers than buyers. At first, the situation occurred with bar gold only, but then happened with jewellery gold as well.
As the gold price has nearly hit the VND20mil/tael threshold, it proves to be profitable to sell gold, especially jewellery gold. Previously, gold shops always tried to pay low for jewellery gold, while trading jewellery gold is now the main business of several gold shops.
The owner of a gold shop in district 1, HCM City, said that many investors bought jewellery before at VND10-15mil/tael; therefore, they now can get fat profit as the price has surged to VND20mil/tael.
Who are the buyers, then?
In fact, demand still exists, but people don’t purchase gold to hoard up. Gold buyers nowadays are surfing investors, who purchase gold to pay debts or stop losses.
The demand for purchasing gold to make payments for house purchases has also been decreasing since the gold price has increased to VND18-20mil/tael.
Deputy General Director of a big gold trading company said that people now consider thoroughly before purchasing gold as they have to spend VND20mil just to own one tael of gold.
In the last many years, Vietnam imported 40-60 tonnes of gold a year. It has not imported gold since 2008, but the domestic gold price has been always closer to the world’s price, which shows the significant decrease in demand.
Borrowing gold to sell
Not only those who have gold are trying to sell gold to get profit, those who don’t have gold are also trying to sell gold. They borrow gold from banks when prices are high and sell on the market to get money. The investors then purchase gold to pay bank debts when the prices decrease.
Investors have rules in gold purchase and sale. In recent days, they sold gold when the prices were over VND19.5mil and purchased gold when the prices fell below that level.
Observers say that a lot of investors who borrowed gold to sell earned fat profit in the last time, when the gold price surged to nearly VND20mil and then dropped to VND19mil/tael. Meanwhile, those who sold gold at VND18-19mil/tael lost money as the gold price then increased further to nearly VND20mil/tael.
While there are more gold borrowers, there are fewer gold depositors. That explains why commercial banks have raised deposit interest rates on gold. People now are not interested in depositing gold.
Turning back on gold, why?
Gold traders say that people now keep a different viewpoint on gold after the world’s gold price skyrocketed to $1,030/oz, while the domestic gold price hit the highest peak at VDN19.5mil/tael in March 2008. At that time, a lot of people rushed to buy gold. However, the gold prices then kept decreasing.
People have realised that injecting money in gold is not the safest harbour, and that making investments at wrong moments is dangerous. Meanwhile, they previously believed strongly that gold could help them preserve their capital.
A banker said that people now understand that gold price fluctuations do not affect the purchasing power of the VND. Moreover, gold proves to be not the safest shelter for people’s assets as the domestic market has a close link with the world’s market, while Vietnamese investors cannot ‘defeat’ international speculators.
VietNamNet, TT
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