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Where to inject money in economic recession?   2009-02-24 - VietNamNet

The gold price has hit a record price level of nearly VND2 million/tael, while the dollar price is forecasted to increase further in the time to come. However, investors have been warned that the current high prices of special commodities are putting investors in high risk.


Where to make investment in economic recession? (part 1)


People rushed to sell gold late last week to get profit

The skyrocketed gold price, on February 17, prompted a lot of investors to jump into the gold market. However, gold experts have warned that the sharp price increases, which brought opportunities, come only several times a year.


General Director of Intergold Nguyen Dinh Tu said that with the gold price being over VND19 million/tael, investors should be cautious with investment decisions if they purchase now hoping the price will surge to VND20 million/tael. “In Vietnam, and all over the world, big and small investors are waiting to sell gold out right when the prices go up,” Tu said.


Analysts said that it was true that the gold price increases brought fat profits to some investors, but there were more investors who incurred loss than investors who earned a profit during the last gold price surge, as investors did not know when to buy and sell.


Huynh Trung Khanh, Senior Advisor to the World Gold Council in Vietnam, said that the gold price skyrocketed in mid-February 2009, because investors fear that the $789 billion demand stimulus package by the US Government will not show any effects for several months, and therefore, they need to keep gold now.


Most gold investors are surfing on investment. This can be seen in the fact that people rush to sell gold at high prices and then purchase gold when the prices go down in Hanoi and HCM City.


However, the lack of experience and information, the inherent problems of investors will make them suffer as they do not know when to purchase and when to sell gold.


Tran Minh A, an investor on ACB gold trading floor, said that very few investors dare sell gold when the prices increase because they think the prices will go up further. Meanwhile, very few investors want to sell gold when the prices begin going down to stop loss, because they hope the prices will go up again. Investors only rush to sell gold when the prices have dropped dramatically, and the more they sell, the more sharply the prices decrease.


As for foreign currencies, experts believe that the State Bank will keep strict control over the forex policies, so that the VND/US$ exchange price will not exceed VND18,500/US$1. This means that investors will have to pay VND17,500/US$1 now and expect the profit of VND1,000/US$1, while they have to risk seeing the price decrease so sharply, exactly what occurred in 2008.


The reports released recently by domestic and international institutions, which suggested that Vietnam should devaluate the local currency, has made people think that the VND will lose its value in the future, thus bringing profit to those who keep dollars.


However, a director of a bank believes that the central bank will thoroughly calculate the suitable level of the VND devaluation against the dollar, while considering the relations with interest rates and other currencies. The director said that the central bank will not let the greenback revaluate too sharply against the VND, since the overly valuable greenback will lead to the ‘dollarisation’ in the national economy.


Doctor of Economics, Doan Ngoc Long said: “Investors should make investments in gold and foreign currencies with part of their capital, and with the principle that all their eggs should not be put into one basket to disperse risks. Long also said that investors should make investments with their own money rather than with loans.


Currently, with the VND deposit interest rates of 7-8% per annum, the dollar interest rate at less than 2.4% per annum on average, and VND devaluation of less than 5%, it would be more profitable to make deposits in VND.


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