Currently gold investment not wise choice


In a talk with Saigon Investment, Dr. Nguyen Tri Hieu, a finance and banking expert, commented that currently the world gold market is fluctuating dramatically because of political and economic tensions worldwide. 

Illustrative photo.

Illustrative photo.

However, the main trend for gold in the medium term is still increasing, so investment in gold at this time is not a very wise choice.

JOURNALIST: - Sir, after a period of increasing galloping prices in recent sessions, domestic gold prices have shown signs of declining. How do you assess the fluctuations in the current gold price?

Dr. NGUYEN TRI HIEU: - Domestic and world gold prices are always affected by economic, political and military factors. At this time, the domestic and the world gold market are fluctuating greatly due to affects of such events. Usually, political and military events are negative factors that often push the price of gold up. 

However, current events are a mix of both positive and negative. For example, the current US-China trade war is still unclear as to what direction it will take. Although the parties have made statements expressing their views, there is no solution to the problem and no results in sight. Therefore, this is still considered an unpredictable factor for investors, as gold prices are fluctuating, sometimes up and sometimes down, sometimes up to nearly 1,150 USD/ounce, and sometimes much below this level.

- Among the fluctuations you mentioned, which has the most impact on the price of gold?

- Gold prices fluctuated sharply in recent times due to impact of many factors, besides also political instability. In Asia, the complex situation in Hong Kong, which is considered one of the continent's major financial centers, has made the financial market, stock market and gold market waver. Along with that, the instability in the Middle East has also had a strong impact on the price of gold, when investors feel that the investment and business environment there is not stable. In Europe, the turmoil caused by Brexit between the UK and EU has not yet been finalized. Meanwhile, in the Americas, a recent coup in Bolivia has also raised concerns about the investment environment in Latin America, where a difficult situation could arise in the near future.

However, I think that the factor that has influenced the gold price the most is still the on-going US-China trade war. Although China wants a trade deal and the United States will reach a trade deal with Beijing, President Trump has not provided any new details on the negotiations between the two sides. Divisive statements made by Mr. Trump have made investors worried that the White House could still raise taxes if the two sides fail to reach an agreement. 

The US stock market has dropped again, causing cash flow towards gold. In addition, in recent days, the world gold market has continuously fluctuated due to direct influence from the US, since the opposition is determined to impeach President Donald Trump. This impeachment process will greatly impact the financial markets, the stock market and the gold market in the US, as well as across the world.

- There is an opinion that the world gold price from now until the end of the year will depend on whether the US Federal Reserve (Fed) adjusts the interest rates or not and to what extent. What do you think about this?

- In the current US economic context, from now until the end of the year, the Fed will continue to lower interest rates again. When the Fed reduces interest rates, USD price will fall and push gold prices to rise due to demand from investors buying gold as reserve, instead of buying US dollar. Looking at the broader picture, at the end of this year, gold prices have strong incentive to increase. The first are concerns about a global economic slowdown from the unending trade war between the world's two largest economies, the United States and China, hence financial markets are forecast to get worse in 2019. However, even when the US-China trade war ends, a technology battle between the two economies will begin.

I think that currently, investing in gold should only be about 30% of total capital you want to invest, and for about six month period is reasonable.
The growth of some major economies in Europe such as the UK and Germany are also showing signs of slowing down. Meanwhile, the US stock index has turned down in recent sessions. Government bond yields around the world decreased after interest rate cuts by three major central banks in the world in USA, China and Europe. This has made investors worried about the global economic slowdown. From the above factors, I think that from now until the end of the year, gold price is still in an uptrend and will continue to increase throughout 2020.

- Sir, from an investment perspective, is the current time a good opportunity to buy gold?

- For investors, the purchase of gold at this time can also be seen as an opportunity for investment, if they see the price of gold will increase in the near future. However, with the strong fluctuations in the current gold price, I think you shouldn’t "put all eggs in one basket", meaning that you should not just focus on gold as an investment.

Speculation in gold at this time isn’t recommended because there are many recurring fluctuations. If you want to invest in gold you need to take into account the medium term, do not buy and sell immediately, because investment in gold can prove volatile. I think that currently, investing in gold should only be about 30% of total capital you want to invest, and for about six month period is reasonable.

- Thank you very much!

Translated by Minh Châu

Lưu Thủy (Interviewer)

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