Gold market in 2012: High risks awaiting

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VietStock FI English - 35 month(s) ago 1 readings

With the State Bank’s tentative policies on the gold market management, gold would become an investment channel with high risks, at least in the next two coming years.

Vietnamese gold investors would feel unsatisfactory when hearing about the supposition that gold would not be an attractive investment channel in the future. They may quote figures to show that gold investments brought a high profit of 30 percent at least to investors in 2011.

Though the gold price had decreased sharply by the end of 2011, the gold price was still higher by 10 percent than the price at the beginning of the year.

As such, gold investments could bring the profit which was higher than the bank deposit interest rates and the profits from dollars purchases. Especially, gold investments are clearly more attractive than the real estate and securities as the two markets have been falling dramatically. Meanwhile, people believe that the gold price would keep rising continuously in 2012.

It was true that gold investment once brought fat profit. However, this was only true until the third quarter of 2011. Meanwhile, the gold price has been decreasing since the fourth quarter of 2011.

The gold market in 2011 has been forecast as having latent risks.

Christoph Eibl, the founder and CEO of Tiberius fund in Switzerland, also said that it is quite a surprise that the gold cannot retain the high prices in the current context of instability. He thinks that gold would be the asset which witnesses the most terrible price adjustments among metals.

He, like many other investors, once thought that the gold price may hit the 2000 dollar per ounce threshold by the end of 2011.

However, the gold price could not climb further and could not surpass the 1923 dollar per ounce record made in August 2011.

A “gold bubble” has been created in the last many years. Over the last 11 years, since 2000, the gold price in the world has increased by 7.6 times, while the Vietnamese gold price has increased by 10 times.

Speculators have to pay heavy prices for the continuous investments in gold. All the money has been injected in gold despite the limited gold price increases. Even SPDR, the biggest gold trust fund in the world, also incurred loss in the fourth quarter of 2011.

40 tons of gold was the net sale of SPDR in December 2011 alone. Meanwhile, the net sales of SJC and other gold companies in Vietnam have not been announced.

In the talk to the press on the threshold of the new year 2012, governor of the State Bank Nguyen Van Binh said: “With the tentative gold market management policies, gold would not be an attractive investment channel any more.”

The gold market management policies have become more obvious after the State Bank has made some moves since August 2011.

In late August 2011, the idea of mobilizing capital from the public, for the first time, was outlined by the governor of the State Bank. However, unlike many other ideas, which never turned realistic, the draft plan on mobilizing gold was submitted to the Government just after three months.

One could easily recognize that though the domestic prices are still higher than the world’s prices. However, in the last quarter of 2011, well known gold trading companies such as Bao Tin Minh Chau, PNJ and AJC tasted the wheeling sensation.

The policies on gold market management may lead to the disappearance of some well known gold brands. However, the biggest risk for gold investors is not the gold price decrease in accordance with the world price reductions, but the exhausting of the liquidity.

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