VietNamNet Bridge – Contrary to all predictions, the gold price in the world’s market reached the new high for the last 27 years, while in the domestic market, the price has nearly hit the VND14,300,000/tael threshold.

At 1.30 pm September 21, the purchasing and selling prices of bar gold in Hanoi had reached VND14,170,000/tael and VND14,270,000/tael respectively, a sharp increase of VND310,000/tael over yesterday’s level.

This was the fourth increase of the gold price today, commencing from the VND14,120,000/tael level. The sharp price increase has been attributed to the happenings in the world’s market. The statement by FED Chairman has led to the greenback’s record devaluation and the sharp increase of gold price. The forward price is now reportedly at $743.1/oz, while the contracts with spot deliveries are inked at $735/oz.

The gold price is marching rapidly towards the record price level at over $850/oz made in 1980. And Tom Winwill, Chairman of Midas Management, has ‘added fuel into fire’ by saying that if FED had to cut interest rates further, the gold price may reach $1,000/oz.

Meanwhile, Credit Suisse has changed its forecast about the gold price from $670-720/oz into $730-770/oz. Foreign media has reported a businessman as saying that clients of the Northern Rock Bank in the UK have withdrawn money from the bank on a massive scale and were using the money to buy gold, pushing the price up.

In this context, GFMS London, a consultancy firm, has forecast that the demand for gold for investment for the last six months of 2007 will be 306 tonnes, 10 tonnes more than the figure for the first six months of the year.

Gold price not overly high in Vietnam

Luu Quang Dien, Director of SJC Hanoi, said that the gold price increases have been anticipated. At the beginning of the year, some experts predicted that the price would be $700/oz by the end of the year, while others mentioned the $730/oz level.

Mr Dien said that the $700-730/oz levels were reasonable, as the gold price was influenced by the value of the greenback, and a series of other happenings in the world, which are foreseeable, including political uncertainty, oil price and higher gold demand.

In addition, Mr Dien said the gold price was going up to reflect its actual value. Ten or 15 years ago, the average income of a worker was enough to buy 0.025 taels, while the minimum salary now is enough to buy 0.05 tael.

Mr Dien said that there were not many transactions today, while the purchasing power was very big yesterday and the days before, when the gold price began escalating.

As the gold price keeps rising, more and more clients are seeking loans in gold from banks in the last days. A vault director of a bank said that the main clients of the bank in the last few days were private gold trading firms, which borrowed loans in gold, hoping to make profit when the gold price decreases.

Mr Tan, the owner of a gold trading firm, said that he mortgaged a savings book with the account balance of VND1.5bil to borrow 100 taels of gold at a time when the price was VND13,150,000/tael. He hoped to make fat profit when the price dropped to VND12,800,000. However, the price did not increase as he expected, but even skyrocketed, and he had to sell the gold now at a loss to pay bank debts to avoid heavier losses.

The skyrocketing price has promoted people to change the means of payment. Vo Dinh Quoc, Deputy Director of ACB Real Estate Company, said that in general, only 20% of real estate transactions were carried out in gold, but the figure had risen to 40%, which could help involved parties to preserve capital.

(Source: VN Media, VNE, VietNamNet)