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Group 11
Gold pricefluctuationsinVietnamin 2012
Gold PriceFluctuations
in Vietnamin 2012
Instructor: Dr. Hoang Xuan Binh
Group members:
1.
Nguyen Thai Ha
2.
Phung Thi Hao
3.
Nguyen Thi My Hang
4.
Phan Thu Hien
5.
Nguyen Thi Hue
6.
Nguyen Thi Hoai
Phuong
7.
Pham Ha My
Page 1
Group 11
Gold pricefluctuationsinVietnamin 2012
8.
Than Duong Thuy
9.
10. CONTENTS
11.
12.
13. INTRODUCTION
14.
15.
Gold has always fascinated the mankind’s imagination and influenced
their urge to possess the same. Gold occupies a pivotal role in the social and economic
life of poor and rich alike. In Vietnam, besides the economic and strong social
considerations, individuals are highly sentimental about the gold jewellery in their
possession, as the gold ornaments are passed on from one generation to another.
Acquisition of gold is considered auspicious and necessary for making family
ornaments to get a sense of wellbeing in our country. Gold is increasingly considered
as an investment that appreciates over years and provides a hedge against inflation.
Gold is also considered as a medium that can be pledged easily during difficult times
for securing financial accommodation.
16.
Gold priceinVietnamin long-time trend is upward but in short-time
period, the price of gold fluctuates very complicatedly. From 2001, gold price
increases continuously. In 2012, the price of gold is really “hot”. The enormous rise in
gold price causes an unhealthy psychological effect on people: when the price goes up,
they try to buy as much as they can, but when it falls, people tend to sell gold as
quickly as possible. This is one of the reasons for the expectation of increasing price
level of gold, beside the main factor brought by the fluctuationsin global gold prices.
The instability of goldprice seems to make Vietnam’s economy worsen. Moreover,
gold market inVietnam has a close relationship with the market in the world. It raises
questions that what the causes, effects and solutions for this situation are; and which
will have a direct effect on?
17.
From the above, the reasons for this fluctuation, effects and solutions are
the most concern of many people. Thus, we chose “Gold pricefluctuations in
Vietnam in 2012” as our topic. The assignment is presented in the following structure:
I.
Overview ingold price
II.
Gold pricefluctuationsinVietnamin 2012
III.
Prediction on goldpricein 2013 and policy suggestions
Page 2
Group 11
Gold pricefluctuationsinVietnamin 2012
18.
19.
20.
Page 3
Group 11
Gold pricefluctuationsinVietnamin 2012
I.
OVERVIEW ON GOLD PRICE
21.
1. Basic knowledge on gold
22.
23.
Gold is a chemical element with the symbol Au (from Latin: aurum
"gold") and an atomic number of 79.
24.
25.
Gold has significantly shaped the history of man, his economy and his
overall perception of life to being a simple hunter gatherer to a man who is driven by
the power of capitalism and understands the value of wealth and its possession.
26.
People hold gold for a safety, security and privacy thanks to its valuable
and highly sought-after precious metal for coinage, jewelry, and other. When buying
the right gold, it is easy to buy, sell, store and transport in a crisis. Many investors
around the world see gold as “the ultimate asset” – an important and secure part of
their investment portfolios. Gold has kept up with inflation during the past 200 years.
27.
Although it is one of the most popular investment portfolios, gold weight
measurement is different in each part of the world. Therefore, investors must study the
measurement of goldin the market they invest.
28.
2. Measurement of gold
2.1. Measurement of goldin the world
29.
Since gold is real money it doesn’t really have a price but more than an
exchange rate with other currencies. In the world, gold measuring is usually done from
2 points of view: Purity and Weight. The purity of gold articles may be described in
Page 4
Group 11
Gold pricefluctuationsinVietnamin 2012
two ways: Carat, meaning parts of gold per 24 and Percent, meaning parts of gold per
100. About gold’s weight, the most widely known and used measure unit for gold is
the troy ounce.
30.
31.
One troy ounce (480 grains) is 31.1034768 grams.
2.2. Measurement of goldin Vietnam
32.
In Vietnam, gold’s purity is also measured in carats. However, most
popular gold’s weight measurement here is “chỉ”, a traditional Vietnam weight unit.
Additionally, “cây” is another unit to measure a great amount of gold.
33.
1 chỉ = 3.75 grams
34.
1 cây = 10 chỉ
35.
36.
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Group 11
Gold pricefluctuationsinVietnamin 2012
1.
The formula to convert the world goldprice to the domestic gold
price
37.
This is the general formula to convert the world price (WGP) to the
Vietnamese goldprice (DGP)
38.
DGP = (WGP + shipping charge + insurance premium) * 1.20556*e
(VND/USD) + processing charge
39.
Page 6
Group 11
Gold pricefluctuationsinVietnamin 2012
II.
GOLD PRICE FLUCTUATION
IN VIETNAMIN 2012
40.
3. The situation of goldpricein Vietnam
41.
In Vietnam, the average growth rate of goldprice increases 24% per year
in recent years. The rate is so high that many people decide to invest into gold and gain
much profit from this investment. After that, the fluctuation of goldprice affects
national inflation by philosophy and belief of residents.
42.
According to economic statistics, the growth rate of goldpricein2012 is
quite slower than that one over the last decade. The average growth rate in2012 is
greater than that of 2011 by 7.83% but much lower than that of 2011 against 2010
(39%).
43.
44.
45.
Month
46.
47.
Gold price/tael (million
VND)
48.
31-01-
12
49.
43.75
50.
29-02-
12
51.
44.89
52.
30-03-
12
53.
44.23
54.
30-04-
12
55.
43.05
56.
31-05-
12
57.
41.59
58.
29-06-
12
59.
41.92
60.
31-07-
12
61.
41.79
Page 7
Group 11
Gold pricefluctuationsinVietnamin 2012
62.
31-08-
12
63.
42.98
64.
28-09-
12
65.
46.35
66.
31-10-
12
67.
47.36
68.
30-11-
12
69.
47.17
70.
31-12-
12
71.
46.47
72.
31-01-
13
73.
45.42
74.
28-02-
13
75.
43.32
76.
29-03-
13
77.
43.84
78.
30-04-
13
79.
42.83
80.
81.
82.
Gold prices can divide into 3 main periods from 2012:
•
From January to May 2012, goldprice fluctuated. At the end of February
2012 it rose dramatically, from 43.8 million dong to 44.9 million dong but
after that it decreased sharply and reached the lowest point at May 2012
(41.6 million dong).
•
From May to August 2012, it remained stably at the average level of 42
million dong per tael. Positive relationship between goldprice and risky
assets such as stocks was being raised.
•
On the contrary, goldprice had the sign of recovery and rapidly reach the
peak with the figure of 47.4 million dong. It is obvious that the price of
gold in the global market that rose to $1,772.60 per ounce had pushed the
domestic market, which has been the trend during the first two weeks of
Page 8
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Gold pricefluctuationsinVietnamin 2012
October. However, from October 2012gold market continued falling
temperature and declined steadily.
83.
As can be seen, the gap between domestic and global price of gold was
still quite big, which is between 2.8-3 million VND (roughly $140-150) in favors of
the domestic one, due to lack of a good connection between domestic and foreign gold
investors. According to Reuters, the level of profit that investors gain from gold
market is lower than other basic goods belonged into RJ/CRB Index.
84.
4. Causes of goldprice fluctuation
4.1. The international influence on Vietnam’s gold price
85.
The world goldprice and our domestic goldprice have a strong relation.
Any changes in the global goldprice can have direct influence on our country’s gold
price, and the pricein the world can be the reference system for the pricein Vietnam.
However, the goldprice of Vietnam’s market is set by the government, so when the
gold pricein the world changes rapidly, the Vietnamgoldprice reacts slowly. In 2012,
there was a rising trend all over the world, which directly caused our domestic price to
fluctuate in the same rising trend. Therefore, investing ingold was still the key to
profits in2012. The phenomenon of increasing inprice of goldin2012 is caused by
some main factors.
86.
The first reason was the decline ingold supply. Gold is provided mainly
from gold mining companies, the recycling gold after being used and the possible sale
of gold of central banks. Some of the largest mining gold producers of in the world are
in South Africa, United States, South America and a little in Indonesia and Australia.
But in this year, mines in those countries were encountering difficulties. Strikes, power
outages and being forced to dig deeper into mines were increasing the cost of
excavating, especially in South Africa. This seems that the drop in production was on
the cards in 2012, and as we all know, fall in supply will lead to the rise in the price.
87.
The second one was the rise in demand. The demand for gold is
composed of three building blocks: Gold for technological applications (particularly in
dentistry and electronics), goldin jewelry and gold as an investment product. 2011
saw a 30% increase in demand for gold coins and this trend continued into 2012 as the
global economy still looked gloomy. Investors, to protect the wealth, intended to a safe
investment like gold.
88.
The third reason was the central bank activities. Central banks around
the world had bought some 150 tons of goldin the 3rd quarter of 2011. This was a
dramatic u-turn from traditional policy which was to sell. Venezuela had been in the
news as leader Hugo Chavez began the process of repatriating the nation’s gold
Page 9
Group 11
Gold pricefluctuationsinVietnamin 2012
supply. Central banks were looking for gold because they were unsure about the status
of foreign debts with some nations threatening to default on loans.
89.
The next one is low interest rates. The interest rates in all over the world
almost remained low in2012 which reduced risks in investing in gold. There was a co-
tango between gold’s lease rate and interest rates which lead to a higher gold price.
Investors also had low regard for hedging companies which put pressure against the
process of hedging.
90.
In addition, one of the important reasons was the economic climate.
Various bailout packages and quantitative easing measures took action and give some
results. Typically, the economy of United States showed signs of recovery by the
quantitative easing policy (QE3) in October 2012; the EU public debt has been more
optimistic and the Chinese economy was not in difficulties after a hot growth period as
many experts considered. They had the direct impact on gold price. When the world
economy has overcome the crisis, the thoughts holding gold would be reduced, and
then it might lead to the downward trend ingoldpricein the next time.
91.
Finally, one more reason is jewelry. Nearly 50% of the global demand
for gold focuses on the jewelry industry; it was account for about 2000 tonnes in
4405.5 tonnes of total gold demand in the world. Moreover, the two countries were the
world’s largest jewelry market, China and Indonesia, have been experienced increases
in demand of gold. Although the physical amount of gold required for jewelry has
decreased from 2011 to 2012 about 4%, the increase inprice of gold means that the
dollar demand was higher than ever.
92.
All the factors above indicate that the world goldprice continue the
rising process following last 11 years. The high level of goldpricein the world created
the psychology holding gold on individuals and businesses which directly and strongly
influences Vietnam’s gold price.
4.2. Domestic influence
a.
Demand and supply
93.
Vietnam is a gold import country. When the government set the gold
price lower than the equivalent world gold price, gold trading companies whose gold
source is available will export gold to gain profit. In case, the domestic goldprice is
higher than the world price, they will import gold to supply the domestic market.
However, this source depends on the quota allowed by State Bank. Thus, the supply
hardly meets the demand of gold, which forces goldprice higher and higher.
Speculation and smuggling make the price of goldin the country more difficult to
control.
Page 10
[...]... manufacturing, paralyzed banking, so investing in such thing as 101 Page 11 Group 11 GoldpricefluctuationsinVietnamin2012 immovable assets, stocks, and finance market was so risky that many investors chose gold as safe haven asset Obviously, the increasing in demand accelerated the gold prices d Inflation The inflation inVietnam is reduced from 18.13% in 2011 to 6.81% in 2012, but it is still a big...Group 11 GoldpricefluctuationsinVietnam in 2012 The gold demand inVietnam includes: gold for jewelry, gold for accumulation, gold for production and gold for investment They have the strong and direct impact on the goldpricein the market 94 Since the gold bars were used inVietnam s gold market, they began to be used as a profitable investment channel or as a form of payment instead of cash... condition of goldpricefluctuations in 2012 had a great impact on speculators or investors inVietnam It not only brought chances but also risks to them 129 130 131 Page 17 Group 11 GoldpricefluctuationsinVietnam in 2012 Reaction to stabilize goldprice of the Government and State bank in 2012 2 Witnessing the fluctuationsingold price, Government and State Bank of Viet Nam (SBV) did certain moves... professional business entities, better ensuring people’s interests 138 139 Page 19 Group 11 III GoldpricefluctuationsinVietnam in 2012 PREDICTION ON GOLDPRICEIN 2013 AND POLICY SUGGESTION 140 6 Prediction on goldpricein 2013 The year 2012 finished with an upward trend ingoldprice level which is a good signal for Vietnam s Economy However, it can be clearly seen that the goldprice will change in 2013... government ingold trading activities leads to many loopholes ingold trading activities and controlling gold prices in the country 100 c Crisis The macroeconomic situation is not stable in2012 made people have a tendency of buying more gold for accumulation and investment According to Planning & Investment Ministry, 2012 witnessed 54,261 bankruptcies of enterprises, lack of capital in manufacturing, paralyzed... and international investors can join the market This solution will help reduce differences ingoldprice and prevent gold smuggling 158 b Mobilizing gold reserve in the population According to Mr Nguyen Van Binh, Governor of the State Bank of Vietnam, there are about 250 to 400 tonnes of goldin population It is huge amount 159 Page 23 Group 11 GoldpricefluctuationsinVietnamin2012 and if government... 149 increasing price period from 2000 to 2012 is continuous Within 12 years, the price of gold reached an average increase of 27%, even in some periods, it increased by 33% But in 2013, the goldprice does not go along the previous cycle and is on downward trend It can be said that the gold rally may remain in the medium term In short, the price of gold will have great pressure, because the belief in. .. the price of gold as before, but in Ho Chi Minh City, by contrast, paying these real estate transactions ingold is quite common As gold prices surge, especially when Vietnam dong is not reliable and safe enough, the individuals or investors must find ways to purchase real estate ingold or dollars instead The amount of real estate transactions ingold is still up to 60% or 70% 109 When the gold price. .. creating pressure on the gold market He thinks that the current domestic price pressure is difficult to break higher However, I do not entirely believe that domestic prices will go down from now until the end of the year but hardly increased at a high level as the previous year 148 Page 21 Group 11 GoldpricefluctuationsinVietnamin2012 151 Page 22 Group 11 GoldpricefluctuationsinVietnamin2012. .. of gold and did not sell it into gold market, leading to the shortage in supply this metal, with hope of raising the price continuously, and then they could sell it with much higher price than the price they bought However, this is risky and many of them had to pay an expensive price to this The goldprice increasing and decreasing making them selling them at lower price and went bankrupt 127 Turning . Group 11
Gold price fluctuations in Vietnam in 2012
Gold Price Fluctuations
in Vietnam in 2012
Instructor: Dr. Hoang Xuan Binh
Group members:
1.
Nguyen. price fluctuations in Vietnam in 2012
III.
Prediction on gold price in 2013 and policy suggestions
Page 2
Group 11
Gold price fluctuations in Vietnam in 2012
18.
19.
20.
Page