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Vietnam in the grip of ‘gold fever’
The gold market has never been so hot before, as Vietnamese small investors seek a ‘safe haven’ for their savings.
Gold price on the rise
The domestic gold price climbed to 20.63 million dong per tael on May 22, and then to 20.71 million dong per tael on May 23, unimaginably high levels.
The market has been in the grip of a ‘gold price fever’ which began nearly two weeks ago.
One tael equals 1.20 ounces or 34.43 grams.
Experts said that investors have been rushing to purchase gold because they consider gold a ‘safe harbour’ in the financial crisis. Small savers especially want to see their assets in gold which they can deposit at banks or keep under the pillow.
The safe habour
By purchasing gold, investors nowadays do not aim to optimize their profit, but they think more of keeping their assets safe.
The fact that governments have pumped into circulation several trillions of dollars to fight recession has prompted investors to invest money in gold in anticipation of high currency inflation.
Predictions vary about the gold price tendency in 2009. Some experts believe that the gold price will keep rising in the first half of 2009, hit a plateau in the third quarter, and decrease later in the fourth quarter, when the US economy is forecast to begin recovering.
Some said that the price may drop to $720/oz, or even $650/oz before stabilizing towards the year end. Meanwhile, others forecast that gold may reach $1,000-1,200/oz if the demand stimulus packages carried out by economies, especially the US, do not show effect.
Opportunities
The sharp price increases can bring big opportunities to investors.
Tran Quoc Quynh, Deputy Editor-in-Chief of the World of Gold magazine, published by the Vietnam Gold Business Association, believes that the gold price will keep rising or stay at high levels.
Quynh speculated that the gold price may reach $1,000/oz in the near future.
However, experts have warned that while the sharp increases may bring fat profits to those who make right decisions, they will also bring heavy losses to those who make wrong investments, and can ‘blow away’ all the assets investors have saved for many years.
Like stock investments, there are two ‘gold investment schools’. The first one targets long term investments, after consideration of economic information and indexes. The second one targets short term investments, like surfing stock investors
Dao Hong Chau, Deputy General Director of Eximbank, said that investors need to decide the principle by which they will make investment decisions -- either ‘low risk, low profit’ or ‘high risk, high profit.
Chau added that in the last few years, most individual investors strove for high profit while accepting high risks. They sell gold right if they can make profit, while they keep gold unsold if they see price decreasing. The investors do not think of selling gold when the price falls to stop losses.
Meanwhile, Albert Cheng, Managing Director for Asia of the World Gold Council, advises investors to make investment in gold using only part of their capital, while the rest should be injected in stocks, real estate or other investment vehicles.
Agreeing with Cheng, World Gold Council Deputy Chairman Huynh Trung Khanh advises to to inject only one-fourth of capital only in gold
VietNamNet, VnMedia
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