The price of gold on the domestic market has surged dramatically, reaching its highest level for 15 years. Gold was quoted at $381.75 a troy ounce on September 10 on the world market, up $5.30 a troy ounce on the four previous days.
Saigon Jewellery Company has not imported gold for two months due to high prices
Consequently, local prices also sprang up, with leading Ho Chi Minh City bullion traders Saigon Jewellery Company (SJC) and Phu Nhuan Jewellery Company (PNJ) pushing prices to record highs.
SJC quoted the local price at VND7.03 million ($456) per tael on September 10 – where one tael equals 37.5 grams and 1.2 troy ounces – much higher than the record price of VND6.5 million ($422) per tael in the early 1990s. The precious metal at PNJ also shot up to more than VND7 million per tael.
Local gold traders are facing great business uncertainties, fearing soaring bullion prices on the world market will deter their material imports.
An SJC official said his company was in dire need of gold bullion for production but “not a bit has been imported for two months due to high prices on international markets”.
“The situation is going from bad to worse,” he said, adding that the SJC had a one-tonne gold import quota for this year, but has only brought in 800kg to date.
“Although we see stable purchasing power now, the big differential between local and global prices discourages us from importing more,” the official said.
A local executive from the World Gold Council (WGC) said: “More gold price fluctuations are possible because if stock prices on the US stock exchange plunges, investors will shift into gold speculation.”
The WGC forecast the world gold prices would possibly be up to over $400 per troy ounce in two months.
It said the local gold price was $13 per tael lower than world levels, but tipped it to match international prices if the world remained high for any length of time.
According to the WGC, Vietnam’s gold consumption is forecast to increase by 7 per cent annually to reach 80 tonnes in 2006.
In 1995, the council forecast Vietnam’s demand for gold bullion would fall in 2002 or 2003 but in reality demand has gone the opposite way. Some 35 per cent of Vietnam’s 59.6 tones of imported gold last year was for savings, up nearly six tonnes in 1997.
The forecast had been made for Vietnam with reference to Thailand, where demand for gold jewellery increased when the stock exchanged opened, a WGC executive explained.
However, the case for Vietnam is different, as gold bullion is still an investment tool at a time there are few alternatives on the financial market.
“Vietnamese people will still prefer buying gold as savings in at least the next five years until the local stock exchange inspires more confidence among investors,” he said.