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Gold still shines for investors   2009-03-27 - Viet Nam News

Many companies and investors with idle money find a headache in the question: what is an effective investment channel amid the crisis? In the basket of gold, dollar, securities, real estate, oil and others, some investors and traders choose gold as a safe refuge.

Many experts are optimistic that the gold price will increase and hover around US$1,000 per ounce this year, predicting a price hike in the first half of the year.

A cloud over real estate and the stock market along with low oil prices and the volatility of the dollar is pushing investors to choose gold, said Lawrence Roulston, a gold analyst. "Investors, still shell-shocked from the financial crisis, have turned to gold as a safe haven," Roulston said. "Recognising the vulnerability of the dollar, investors have a hard time finding a currency that doesn’t look shaky. Government bailouts are piling trillions of dollars worth of debt on to every major economy."

"Investors are becoming more aware that debts of that magnitude are leading to massive increases in money supplies. Over time, that money will become less valuable in relation to hard assets, with gold being the most evident."

When almost all countries in the world have pumped trillions of dollars to bail out economies, this implied the threat of inflation in the future.

Deputy chairman of the Viet Nam Gold Business Association Huynh Trung Khanh, said: "In case of inflation, deflation or recession, gold will become a safe and effective shelter."

Big fluctuations

Frederic Panizzuti recommended investors spend a ratio of their money on gold to ease risks and regard it as an insurance amid volatility of the financial market.

Economists warn, however, that investors be careful with fluctuating gold prices, given that they ranged from US$750 to an all-time high of $1,014 an ounce last year.

According to international and local analysts, gold prices will possibly follow a similar fluctuation this year, from $750 to more than $1,000 per ounce.

They may continue to increase strongly in the first half, keep stable in the third quarter and decrease in the fourth quarter, Khanh said. He based his opinion on the possibility of US economic growth by the end of this year as predicted by international experts.

The analysts admitted it was difficult to forecast prices, thus investors must make careful decisions in gold trading. They may make great profits but also suffer great losses.

"Gold will certainly go higher over time," said Lawrence. "However, there is no assurance that the price will move in a straight line. History tells us that the gold market is subject to violent swings as investors and other participants in the gold market change their mood."

It is not easy to estimate gold prices because there are a wide ranges of factors affecting gold prices hour by hour, day by day.

Notably, any data (bad or good) or volatility on economic growth, unemployment rate, consumption, financial and banking situation, stock market, interest rate, production and others of the US economy and its currency may immediately affect gold prices.

Similar elements occurring in other big economies of the EU, Japan and China also tend to push gold prices up and down.

Decisions on economic stimulus packages of giant nations also impact as do oil prices - usually oil up, gold down and vice versa - and political woes at any corner of the world.

There are two methods for gold trading in Viet Nam: Buying gold and holding until the prices go up and trading on the gold exchanges of ACB, VGB, Dong Duong, Phuong Dong among others.

The former is traditional trading, the latter is more modern and popular in developed countries but unfamiliar in Viet Nam.

The second is more risky because investors can make short sales (they can buy or sell gold with a value 10 times higher than the money or gold they possess).

More risk means more profit or more loss.

Local experts suggest investors choose the first.

Tran Quoc Quynh, a senior official of the Viet Nam Gold Business Association, said investors needed an overview of society, economy and politics and to track the global and local economic situations, oil prices, gold prices and dollar.

Lam Minh Chanh, director general of Dong Duong Securities Co, said investors should obey principles of profit-taking and cutting losses strictly because gold prices were difficult to forecast.

Some pundits say gold is possibly the most attractive investment channel at the moment but investors are warned to get independent advice.

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