Gold makes a comeback on higher oil, anemic dollar

Friday, May 23, 2008
Gold makes a comeback on higher oil, anemic dollarGold prices surged by over 2% Wednesday, in the process waking up a market that had gone into slumber for a while. Saigon Jewelry Company (SJC) gold went up to VND18.27 million (US$1,134) per tael (37.5 grams) in the morning and continued to move up to close at VND18.31 million ($1,137), a one-day gain of VND380,000 ($23).

Trading volume at the Saigon Gold Exchange jumped by 5.3% to 383,700 taels worth more than VND7 trillion ($435 million).

A HCMC trader said he would have earned VND52 million ($3,200) Wednesday if he had sold the 100 taels he bought last Friday.

“But the price will possibly move up in the coming days, so I won’t sell now,” he said.

Nguyen Thi Cuc, deputy general director of Phu Nhuan Jewelry Company, said the recent hike in gold price had slowed down sales of jewelry and boosted trading in mini gold bars this month.

She also said the firm sold 3,850 taels and bought 2,610 during the day.

An SJC representative said his company sold 2,000 taels and bought 5,000 on the same day.

Internationally, the precious metal moved up to $925.25 per ounce from $920.

It has soared 6% in the last four days.

Experts from the Vietnam Export Import Commercial Joint Stock Bank, or Eximbank, said the gold price gain was sparked by growing inflation worries after oil climbed to a new record high.

Oil prices soared past $130 a barrel for the first time amid anxiety about stretched supplies and strong demand for energy, and a weakening dollar, AFP quoted analysts as saying.

A weakened dollar also gave gold some lift as investors across Asia gained more buying power against US dollar-denominated bullion, Reuters said in a report Wednesday.

“The combination of oil and the currencies spells more interest in gold,” the media quoted a metals dealer at an Australian bank as saying, adding there was a risk profit-takers could take some of the air out of the rally if the dollar regained some strength.

Banks mobilize gold

After the central bank abandoned the 12% deposit interest rate cap last Saturday, local banks have pushed up the gold deposit interest rate alongside the dong and dollar rates.

Eximbank has raised its gold deposit interest rate by 1.5% per year across the board.

The lender is offering 3.5% per year for one-month deposits, rising all the way up to 5.5% for 12 months.

Housing Development Bank has raised its three-month term deposit rate from 4.5 to 5.5% per year.

Huynh Trung Khanh, vice chairman of the Viet Nam Gold Trading Association, said the banks raised the interest rates in the hope of selling gold abroad to mobilize more dollars.