Gold Price Hike Continues?

Gold price has shown many strong fluctuations over the past few weeks. There is currently no prediction about the reduction in gold price while many experts believed that it will jump to US$800 an ounce in the near future.

SJC 9999 gold was priced at VND13 million a tael on May 2. (Photo: C.T)

In the final week of April, 2006, the domestic gold price continued to fluctuate. On two days of April 30 and May 1, Sai Gon Jewelry Holding Company (SJC) traded 9999 gold at VND13 million a tael, up VND300,000 over April 24 and VND1.9 million over the beginning of the month.

Over the first four month of 2006, the domestic gold price set its latest record when it increased by 16.9% (with an average of 4.2% a month). Meanwhile, the Viet Nam’s Consumer Price Index (CPI) increased by 3%.

According to the General Statistic Office, the domestic gold price increased 5-6 times compared with the inflation rate early 2006 and 169 times compared with the US currency.

Compared with 2000, the increase rate of the domestic gold price was 227.8% while these figures of the inflation and the US currency were 133.3% and 112.1% respectively.

Thus, as they could earn more benefits, some Vietnamese preferred to invest in gold than VND or US$, which used to be favorable means of savings in Ho Chi Minh City.

When the gold price showed strong fluctuations during these days, local gold enterprises witnessed a new record in the material gold import volume to Viet Nam as the country imported 14 tons of gold (1 ton = 26,660 taels). The SJC reportedly boosted up its production capacity in order to satisfy the domestic demand for gold bars.

The material gold was imported to Viet Nam when the domestic gold price was increasing strongly. It was even VND450-500,000 a tael higher than the global one.

According to local gold enterprises, the gold price high rise was caused by the increasing purchasing power in the domestic market and the former long-lasting shortage of material gold for production.

Vietnamese consumers buy gold jewelry at SJC's Kim Hoan Viet shop.

Late April, 2006, the global gold price also set its new record over the past 25 years as it jumped to US$655 an ounce, an increase of 24% over 2006, 50% year-on-year and twofold compared with three years ago.

There were many reasons for the global gold price’s rapid appreciation on five consecutive months, among which were the political uncertainty in Iran, a remarkable increase of the global crude oil price, which was US$72-73 a barrel, the Central Bank of the United States’ possible decision to lift its monetary tightening policy applied over the past 22 months, the strongest decline in the US currency compared with other currencies. Currently, one EUR is equal to 1.2666 US$, the lowest rate over the past 11 months.

The global gold price last week continued to climb from US$622.3 an ounce on April 25 to US$655 on April 30.

Beside the world crude oil price exceeding US$73 a barrel, the gold price rise was affected by many happenings in the international markets, like China’s decision to increase its currency value over the US dollar, aiming at reducing its global trade deficit, interest rate increases by many central banks, the positive economic data coming from the US. Moreover, the gold speculation has also pushed up the global gold price.

Also, according to many financial analysts, the gold price increase was also caused by inflation and the rising demand for gold trading on foreign accounts all over the world.

There is no prediction about the reduction in gold price. Experts predict  that the gold price will jump to US$800 an ounce.

By TM – Translated by Trong Khuong

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