Constant fluctuation in gold price

SGI

Over the last eight years, the gold market in Vietnam and across the world has experienced many ups and downs with constant fluctuations. But history shows that gold prices have a tendency to suddenly shoot up as well.

Illustrative photo.

Illustrative photo.

In 2019, the excitement to invest in gold returned when it reached a high of USD 1,400 per oz., and occasionally even breaking at USD 1,500 per oz., creating high expectations of price going up even higher. However, investors need to remain cautious as the gold market is still very volatile.

Sets peak then plunges

In 2011, gold investors experienced an unforgettable phase when the world gold price fluctuated sharply from more than USD 1,300 per oz. to USD 1,900 per oz., and the domestic gold price increased from VND 35 mn per tael to VND 49 mn per tael. The peak was felt on 8 and 9 August 2011 when gold price rocked the financial market, and world gold rose to hundreds of dollars per session, while domestic gold increased by VND 5 mn in just two days.

After setting a peak of USD 1,900 per oz., the world gold price started falling day by day, and in the last eight years, this price has never been reset. In the domestic front, the gold market has been less active, as the State Bank of Vietnam (SBV) held strict control through many policies issued from 2012 to 2014, such as exclusive production of SJC gold bars; tightening gold bar trading; stopping mobilizing of gold and lending of gold; and market intervention through gold bidding.

Influence of geopolitical tensions

In 2014, the world gold price fluctuated much more erratically. Gold continuously increased in the first quarter from around USD 1,200 per oz. to nearly USD 1,400 per oz. In the second quarter it suddenly went up then dropped sharply in the third and fourth quarter to only USD 1,190 per oz. This was due to geopolitical tensions taking place all over the world. As for the domestic market, after days of increasing and decreasing due to influence of world prices, it closed at the end of the year at VND 34.96 mn to VND 35.18 mn per tael.

This gloomy situation prevailed until 2015, when the US Federal Reserve (Fed) raised interest rates for the first time in nearly ten years, making the gold investment channel less and less attractive to investors globally. Gold price also hit a six-year bottom at only USD 1,049 per oz., while SJC gold bar hit bottom in five years, falling below the milestone of VND 33 mn per tael. This showed it had devalued by about one third the value compared to 2012.

In 2016, the gold rush in Vietnam gradually became a thing of the past and the trading atmosphere on the market became quite dull, even when the domestic gold price was lower than the world gold price. In last ten years, this price only surfaced twice, in 2008 and 2010. But the slight recovery of world gold price also helped SJC gold increase by VND 3.6 mn per tael. In 2017, there was more expectation when raised gold prices and the continued momentum stayed until the first quarter of 2018, fluctuating around USD 1,302 to USD 1,357 per oz.

However, this trend ended by April 2018, when the US-China trade war started and investors began to see the US dollar as an investment channel instead of gold. Accordingly, from more than USD 1,365 per oz., gold price fell by 15% to USD 1,160 per oz. in August 2018. This is the lowest it has fallen in one and a half years, and although it recovered in the last month of the year, it could not return to USD 1,300 per oz.

Market unpredictability

In 2019, the gold market scenario is completely different from previous years, bringing in more vibrancy. From the first week of the year, the domestic gold market has been heated with a strong development of world gold price. In just one week, the domestic gold price that was between VND 36.44 mn to VND 36.54 mn per tael gradually increased to VND 36.7 mn to VND 36.8 mn per tael. This increase of about VND 160,000 in consecutive sessions has awakened the market and the participation of investors. However, in the first five months of the year, the trend of increasing and decreasing intertwined in a narrow margin. This was not enough to pull the price of gold beyond the level of VND 36.7 mn per tael.

Starting in June, the gold market saw huge fluctuations, especially when the world gold price at USD 1,298 per oz. has continuously gone up, breaking the USD 1,400 per oz. mark and reaching USD 1,423 per oz. on 25 June. This caused SJC gold price to quickly approach the milestone of VND 40 mn per tael, when it was adjusted to VND 39.25 to VND 39.52 mn per tael. By 18 July, gold price in the New York market reached USD 1,445.5 per oz., and SJC gold bar reached VND 39.75 to VND 40.07 mn per tael. Not stopping there, within eight years since 2011, gold price exceeded USD 1,500 per oz. for the first time on 8 August, peaking at USD 1,548.9 per oz. on 29 August, pulling domestic gold prices through the milestones of VND 41 mn and VND 42 mn to VND 43.07 mn per tael.

The level of USD 1,500 per oz. could not sustain for long. From September, the world gold price leveled off, dropping to USD 1,466 per oz. at the end of the month. Meanwhile, the domestic gold price also continuously fluctuated from VND 43 mn to VND 41.3 to VND 41.72 mn per tael. At the end of October, the world gold price returned to the threshold of USD 1,495 per oz. after the market recorded the Fed's decision to lower interest rates for the third time in 2019. But with the influence of the US-China trade war, the world gold price also recorded many declining sessions in November.

In perspective of investment, the happenings over the past one year have raised the question of whether gold investment should get more attention. In fact, from the beginning of the year, financial experts advised investors to be cautious with gold because they did not see strong breakthroughs. Specifically, professional investors can invest in gold with appropriate amounts, and retail investors who want to surf should carefully stick to the market and choose the appropriate time to benefit, because gold prices fluctuate erratically in an unpredictable world market.

In fact, in mid-November, gold contracts fell for several consecutive sessions to the lowest level since August 2019, when the strength of the US dollar and the new peak of US stocks contributed to the decline. Accordingly, the domestic gold price reduced to nearly VND 41 mn per tael. Thus, if investors bought gold at the time of sharp price increase in August, they might suffer losses at this time.

Translated by Hoa Nam

Thien Minh

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