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Gold market demand quiet despite recent strong gains

14:53 | 07/08/2019

Gold prices on global markets have made strong gains in the past two months, but investors with short-term appetite seem uninterested in gold.


Gold prices have surged in both domestic and international markets but Vietnamese market demand has remained silent.(Source: petrotimes.vn)

Gold futures for the first time in six years broke the 1,450 USD per ounce last week, gaining 1.75 percent on August 2 and a total 13.6 percent since May 28.

The strong growth of gold futures is attributed to previous speculations of a Fed rate cut – which was realised on May 31, worries about the global economy outlook, and increasing political, geographical and economic tensions.

Those developments, especially the Fed rate cut, sent US bond yield rates down and weakened the US dollar, which are the key factors making gold more expensive.

In addition, more tensions around the globe have pushed investors away from risky assets like stocks and towards safety in gold. Meanwhile, the possibility of a global economic slowdown increases after China reported its Q2 economic growth of 6.2 percent is the lowest in 30 years and central banks have delivered gloomier economic growth forecasts.

Those negative factors are forecast to boost gold prices to 2,000 USD per ounce at the end of the year as they may make investors more pessimistic and avoid purchasing risky assets.

The increases of gold futures on global markets also raises the prices of Vietnamese gold products to around 40 million VND per tael, equal to 30 million VND (1,290 USD) per ounce

Since May 28, prices of gold products have gained about 10 percent at Phu Nhuan Jewellery JSC (PNJ) to 39.92 million VND for a tael, equal to 29.94 million VND per ounce.

Though prices have reached new levels, market demand is quiet, proving Vietnam’s success with its anti-gold policy.

According to Phan Dung Khanh, director of investment consultancy department at Maybank Kim Eng Securities Co Ltd, the domestic gold market may not heat up like it did eight years ago.

Some factors that may benefit the domestic gold market include the stability of foreign exchange rates between the VND and foreign currencies, a zero percent US dollar savings yield rate and tightened policies regarding the number of eligible gold businesses, he told Dau tu (Investment) newspaper.

According to banking expert Can Van Luc, the domestic gold market was quite quiet in the first six months of the year though gold prices gained 10 percent globally and 6.3 percent in the domestic market.

In the past, buyers rushed to gold shops immediately when they heard gold prices were up only 2-3 percent, he said.

The gold market had been controlled well and the stability of the foreign exchange rates had increased the economy’s creditability to people, making them less interested in buying gold, Luc said.

The domestic gold market had remained stable, economist Nguyen Minh Phong said, as there was not much difference between buying and selling rates as well as between global and domestic gold prices.

The daily trading was stable, plus, the central bank did not have to make public announcements to stabilise the market – which had been done before whenever the market turned volatile, Phong said.

In addition, rushing into gold at the moment may not be a smart decision, especially after the Fed cut lending rates, business insiders said.

Buying gold is somewhat risky in the short term while there are also other attractive options for investors such as securities, real estate and corporate bonds, they said.

Gold should be a long-term investment for institutional investors and any individuals buying in gold must stay updated about prices to lock in profits at the right moment, they said.

VNA

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