Investors opt for gold over stocks

Tuesday, April 22, 2008
Investors are creating a mini-gold rush, perceiving gold as a stronger investment than either stocks or savings at a time when the stock market is stagnant and commercial banks have colluded to place a voluntary cap on deposit interest rates.
Hanoi's Bao Tin Minh Chau Jewellery Co yesterday reported a large volume of buyers, outnumbering sellers by about four-to-one over the past week.
Domestic gold prices yesterday were off from last week's high of VND18.3mil (US$1,143) per tael by about VND250,000, but prices were expected to remain high in the coming weeks as investors pull deposits out of banks and turn to gold.
Sai Gon Jewellery Co yesterday listed buy/sell prices at VND18.05-18.13mil ($1,128-33) per tael (a tael is equivalent to 1.2 ounces) in Hanoi and HCM City, while Hanoi-based Bao Tin Minh Chau listed prices at VND18.05-18.18mil.
The prices represent increases of nearly 36% over the same time last year and of 14% since the beginning of this year.
On global markets, gold prices have gained 31% since the end of 2007. Gold yesterday fell to $923.20 per ounce on NYMEX from a high of $935 per ounce on Friday.
Unlike many western nations which view gold as personal property, Vietnam sees it as a fungible commodity, widely used as a medium of payment for large-purchases such as real estate, and banks here will pay interest on deposits of gold, based on the value of the gold at the time it is withdrawn.
VietA Commercial Joint Stock Bank last week increased interest on gold savings to 4%, for 12 month terms and 4.5% for 18 months.
"That's even better than interest on the US dollar. Dollar interest is 6% per year but the exchange rate isn't increasing like gold prices," commented Nguyen Thi Thu Hoai, a VietA Bank customer.
Last year, when banks only offered 1-2% for gold savings, depositors gained little but the security of letting the bank hold onto their gold, she said. However, with the current interest on gold savings and the long-term uptrend in gold prices, saving gold in banks has become an attractive choice
Investing in gold at this time of high inflation, frozen real estate prices and a sluggish stock market was a wise choice, said Dinh Nho Bang, general secretary of Viet Nam Gold Trading Association
But Huynh Trung Khanh, senior consultant of the International Gold Council, cautioned, "Traders should invest in gold for at least one to three years, minimising the risks of short-term investing or speculating."
Khanh also warned that investors who borrowed from banks to trade in gold should be cautious due to rapid fluctuations in gold prices day-to-day.
Some banks are offering gold futures contracts but the option has not yet proven attractive to many investors. (VNS)