Last update 2/27/2012 1:00:00 PM (GMT+7)

Investors abandon gold

VietNamNet Bridge – Observers have pointed out a noteworthy thing on the gold market: the gap between the domestic and world’s price, which was very big at 2.5 million dong per tael, has been narrowed to 1-1.2 million dong. Is this because investors have got tired of investing in gold and left the market?

Money leaving gold market for stock market?

A director of a securities company has affirmed that some loyal clients of the company have “heated up” their accounts with “new money” – the money from the gold market.

In late January 2012, some gold investors whispered in each others’ ears that it was now the right time to pour money into stocks instead of gold.

Is that true that the stock market is recovering, and stock price is increasing? However, in September 2011, when the Hanoi Stock Exchange saw the price increase by 20 percent, securities investors still did not intend to withdraw money from gold to put into stocks. It was because gold investors still believed that gold price would climb to 2200 dollar per oz, or 50 million dong per tael.

In 2011, gold was the investment channel which could bring the highest profit. In July and August of 2011, the world’s price jumped by 30 percent, while the domestic price soared by 42 percent.

However, since October 2011, the domestic gold price has only hovering around 44-45 million dong per tael. In the fourth quarter of 2011, people still kept optimistic forecast that the gold price would keep rising. Meanwhile, since early 2012, Vietnamese experts have quoted Gold Trust’s and Bank of America’s experts as saying that gold has become no more a safe investment channel.

As such, the imagination about the new gold price peaks at 2200 dollar per ounce has also disappeared.

While the world’s gold price is still struggling to stay at 1650-1750 dollars per oz, the domestic price cannot retain the latest peak of 46.6 million dong per tael. While gold investors heard pessimistic forecasts about the gold prices, in January 2012, Governor of the State Bank of Vietnam stated: “Gold would be a risky investment channel.”

After the message was released, the gap between the world’s and the domestic price has been narrowed from 3 million dong to 1.2 million dong per tael.

It seems that investors have run out of patience. Together with the warning that gold would be no longer an attractive channel, the State Bank said it is tightening the management over the gold market and compiling the plan to mobilize gold from the public, which are all the big worries hanging over 12,000 gold companies.

Initially planned to be issued in early November 2011, but the draft decree on the gold market management still has not been completed. Some analysts have commented that the State Bank of Vietnam has been too “affectionate” towards SJC and some big banks, while the majority of gold companies have to leave the “playing field of the big guys.”

Commercial banks will have to stop mobilizing capital in gold and lending in gold by May 2012. If the plan is implemented as announced, it may happen that the liquidity of the gold market would repeat the image of the stock market in the second half of 2011.

Since December 2011, the gold market has been “sleeping in the daytime.” Though transactions still have been held, the gold prices have not seen any “big waves,” while the number of seller has always exceeded the number of buyers.

CNBC once quoted a gold investor as saying that the gold price may drop to 1000 dollars per ounce. If so, this would be a tragedy to the domestic price which would plummet to the 37-38 million dong per tael levels.

Viet Thang