The Saigon Jewelry Company (SJC) has seen its gold price reach a new record of VND80.3 million ($3,304) per tael, representing a nearly 20% increase since the beginning of the year. This surge in price is primarily due to a significant spike in demand rather than sellers inflating prices for profit, according to Huynh Trung Khanh, deputy chairman of the Vietnam Gold Traders Association.
One factor contributing to this increase in demand is the anticipation of a change in U.S. monetary policy, with expectations of a reduction in Federal Reserve interest rates in March. This could potentially lead to a devaluation of the U.S. dollar and a subsequent boost in gold prices.
Khanh also noted the influence of a “herd mentality,” with individuals rushing to buy gold as it reaches new historic highs in hopes of future price increases. However, the main reason for the rise in gold prices is the significant gap between demand and supply, with the latter remaining unchanged.
In Vietnam, the production of gold bars is closely regulated by the government, with the state-owned SJC being responsible for this process. However, the production machinery for gold bars at SJC has been inactive for several years. As a result, the domestic supply of gold bars has not increased since 2014, and some gold bars have been diverted to create jewelry for export.
Before 2020, gold bar prices were usually slightly higher or equivalent to jewelry prices. However, due to a substantial export of gold bars in 2019, the supply has become “very limited,” leading to a surge in prices and a growing disparity with jewelry prices.
Khanh suggested that gold bars are now becoming a type of antique traded among investors and that their prices will only decrease if the State Bank of Vietnam decides to increase the supply. He cautioned that buyers should exercise caution in making investment decisions, as gold bar prices can fluctuate widely and carry high risks.
As of Thursday morning, the gold price in Vietnam had increased by 0.12%, reaching VND79.6 million per tael, standing 34% above the global rate. However, by Thursday afternoon, it experienced a plunge of 2.52%, dropping to VND77.5 million.
Additional insight: The surge in gold prices in Vietnam reflects a combination of global economic shifts, fluctuating demand, and the impact of government regulations on local gold production. Investors should closely monitor these factors and exercise caution when considering gold as an investment option.
