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Gold rush losing steam?
Gold prices have continued to drop in the early days of 2011. This is quite different from previous years when prices of the precious metal increased along with demand, particularly during the Tet season, thanks to the payment of bonuses.
Early January, the domestic gold price was VND36.3million ($1,728) per tael, but it has since dropped to VND35.4 million ($1,685). The drop is partly due to continuous price drops in the world market. (One tael equals 12 troy ounces).
Since the beginning of the new year, international investors in the world market have tended to sell gold more than they bought. For instance, the SPDR Gold Trust – an initiative of World Gold Trust Services, from January 4-20, sold 29 tonnes of gold but bought only in dribs and drabs. This action has certainly affected the circle of investors and other financial organisations in the world, encouraging them to sell their gold as well.
In addition to the decrease in the world gold prices, independent market watchdogs also felt domestic gold prices could drop further since the current domestic rate was still VND1.1 million ($52.3) a tael higher than the global rate.
In 2010, gold traders imported or bought gold from people at high prices so the domestic rate did not drop as much as the world prices.
Now, although domestic gold prices have dropped, the market's purchasing power does not seem very high, and this has been attributed to public expectancy that the prices will drop further.
Meanwhile, some financial analysts think the economic recovery has encouraged investors to shift from gold trading to traditional areas such as the real estate or stock markets.
However, there are other experts who predict world gold prices will continue to increase because inflation is likely to rise all over the world. Gold is still considered the safest investment in reducing losses from inflation.
Experts from major banks also said that the gold price might increase again since many people would seek to buy gold when prices stood at an attractive level. Gold prices in 2011 would likely remain at over $1,400 per ounce, they said.
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