How much gold kept among Vietnamese people?

Last update 10/11/2010 09:00:00 AM (GMT+7) 

How much gold kept among Vietnamese people?

VietNamNet Bridge – Newly released information that Vietnam has imported 1000 tons of gold in the last 20 years has stirred up the public. Experts now try to guest how many tons of gold are being kept among Vietnamese people and what Vietnam should do to use the huge capital in the most effective way.

The information about the 1000 tons of gold imported in the last 20 years was released by Le Duc Thuy, former Governor of the State Bank of Vietnam, now Chair of the National Finance Supervision Council. The head of the council did not confirm the existence of 1000 tons of gold among the public, but he said: “I am sure that a large volume of gold is being kept in people’s homes”.

Thuy commented that Vietnam should not make a hasty move to prohibit the transactions in gold. The prohibition can only put gold out of the official circulation, while the gold will still exist in the society. Meanwhile, gold should be seen as an important source of capital, and if gold cannot be put into official circulation, it will be “sitting idle”, not making profit, or will be traded on the black market. i.e out of the control of the management agencies. Thuy believes that it would be better to attract the huge capital (gold) into banks instead of prohibiting transactions in the gold.

While the national economy needs more and more capital from different sources for its development and investment, gold trading floors have been shut down and the gold prices have been continuously climbing to new highs. One week ago the State Bank issued a legal document to scale down the activities of mobilizing capital in gold and lending gold.

However, a senior official of the State Bank of Vietnam has denied the fact that 1000 tons of gold is now lying under people’s pillows. “To date, no one can say for sure how much gold is being kept among people,” he said. 

The figure cited by the former Governor of the State Bank is sourced from the World Gold Council and the figure does not include the illegal imports and the import volume through other unofficial channels that the organization still cannot reckon up.

Meanwhile, the general director of a famous gold trading company guesses that people are only keeping 200 tons of gold because when the world’s gold prices were higher than the domestic prices, a substantial volume of gold was illegally exported,. However, he stressed that 200 tons of gold would also be a large volume of capital, worth $10 billion and the capital should be put into business rather than sitting idle.
Meanwhile, VnExpress newspaper quoted a director of a big bank in Hanoi as saying that the management agency needs to consider the specific characteristics of the market in Vietnam. In other countries, gold is considered as a type of good and not a tool of payment. Therefore, the volume of gold kept among people is not very big. Meanwhile, in Vietnam, gold is not only used as a kind of good (jewelry products), but also as a kind of asset (people store gold instead of cash)

If the management agency tries to weed out gold from the official channel, even though people still want to keep gold as their assets, this is really a kind of the management agency’s “voluntarism” which wastes a large amount of capital.

“It will be not the right time to weed out gold from the official channel until gold is no longer favored by people,” he said.

Meanwhile, the central bank, while trying to protect its view that it is necessary to prohibit transactions in gold, said that the massive mobilization and lending in gold have been making the dollarization in the national economy more serious and encouraging speculation.

Governor of the State Bank of Vietnam once declared that in case the market has gold in excess, the central bank may spend money to purchase gold to increase gold reserves.

P.V

Vietnam: Gold and dollar prices escalating, no one benefits

Last update 09/11/2010 04:59:02 PM (GMT+7)

Gold and dollar prices escalating, no one benefits

VietNamNet Bridge – The gold and dollar prices have been increasing continuously, threatening businesses. Especially, the weaker dong does not benefit exporters, even making their business worse.

At 9:45 am of November 9, the gold price jumped to 38.2 million dong per tael, increasing by 2.5 million dong per tael compared with the opening prices (one tael is equal to 1.2 oz). Meanwhile the dollar price soared to 21,250 dong per dollar, the highest level so far.

The dollar prices quoted by commercial banks have been stable, at 19,495-19,500 dong per dollar at Vietcombank, and 19,470-19,500 dong per dollar at Eximbank.

The Japanese yen has also appreciated against the dong. At 8:20 am, the yen price was quoted at 246.63 – 253.99 dong per yen, an increase of three dong per yen in comparison with the week’s opening price. The euro is now trading at 28,101.00 dong per euro.

In principle, the dollar appreciation will benefit exporters, because the weak local currency will make domestic products cheaper, thus more competitive in the world market. But in fact, export companies are now like cats on hot bricks. 

Tran Quoc Manh, Chair and General Director of Sadaco, said the dollar price increases have pushed the prices of input materials, transport fees and labour costs high up.

Manh admitted that the company has earned more money thanks to the dollar appreciation, but the profit is not big enough to cover the higher production costs. Especially, Sadaco, like many other producers in Vietnam, have to import input materials to make final? products in Vietnam. Therefore, they now have to pay more money for the import materials due to the more expensive dollar. Manh stressed that when policy makers think of the monetary solutions to encourage exports, they should consider of the fact that Vietnamese producers have to pay for imported input materials in dollars.

Besides, export companies complain that though they sell foreign currencies to banks, when they need money to make payment for material imports, they cannot buy foreign currencies from banks at the prices at which they had sold themto banks before.

Nguyen Thi Cuc, Deputy General Director of Phu Nhuan Jewellery Company (PNJ) said in September, her company earned $300 million from gold exports and sold the sum to banks. However, her company now cannot buy dollars from banks at the quoted prices.

“The banks, though admitting that PNJ is a loyal client who should get priority in dollar purchases, still refuse to sell dollars to us, saying that they cannot sellat such low prices,” Cuc complained.

In fact, banks still have dollars to sell, but at the prices set by banks, not the prices quoted by clients. 

Le Dang Minh, Managing Director of Gimeno, a fashion company, said that he has just bought dollars from a bank. Though the quoted price was 19,500 dong per dollar, in fact, Minh had to pay 20,100 dong per dollar. Minh said that he still does not know how to “legalise” the gap of 600 dong per dollar. As the input materials cost 70 percent of the values of his products, the dollar price increases have made the company suffer losses.

However, Minh believes that those who suffer the most now are labourers, whose salaries do not increase in proportion with increases in the goods prices.

Minh does not think that export companies deliberately refuse to sell dollars to banks, thus causing the dollar shortage. He said that only the companies which have profuse capital can keep dollars on their accounts. Meanwhile, small companies like his have to sell dollars to banks right after they earn the money, because they need money to continue production.

Thanh Van

http://english.vietnamnet.vn/en/business/1282/gold-and-dollar-prices-escalating--no-one-benefits.html

Vietnamese rushed to purchase gold, but shops only sold gold in dribs and drabs.

Last update 10/11/2010 02:43:36 PM (GMT+7)

Gold prices dancing, shops sell gold in dribs and drabs

VietNamNet Bridge – The gold market was burning yesterday with the price increasing in waves. People rushed to purchase gold, but shops only sold gold in dribs and drabs.

Gold and dollar prices escalating, no one benefits

Gold prices fluctuating

In the afternoon of November 9, the gold shops on Tran Nhan Tong street in Hanoi were less crowded than in the morning of the same day. Explaining this, some people told VietNamNet’s reporter that many people purchased gold in the morning already, and they did not have to go to gold shops any more.

At Bao Tin Minh Chau shop, only a limited volume of bar gold was seen on display. Those people, who wanted to purchase gold in big quantities, were told to come back the next day to get deliveries.

The gold prices in the afternoon saw slight decreases from the prices in the morning. However, VietNamNet’s reporter found out that the prices are still fluctuating.

At 4 pm, the price of Rong Thang Long brand gold of Bao Tin Minh Chau was quoted at 36.7-37.3 million dong per tael (purchasing and selling prices) (a tael is equal to 1.2 oz). At 5 pm, the purchasing price increased by 200,000 dong per tael to 36.9 million dong per tael, while the selling price dropped by 100,000 dong to 37.2 million dong.

Rong Thang Long brand gold’s closing prices were 36.9-37.45 million dong per tael (purchasing and selling prices) which meant that the purchasing price remained unchanged while the selling price increased by 250,000 dong per tael.

The prices SJC brand gold, sold by Phu Quy Company, also fluctuated. At 5 pm, the price of SJC brand gold was quoted at 37-37.5 million dong per tael, an increase of 100,000 dong per tael in purchasing price in comparison with the price in mid afternoon, and 300,000 dong in selling price.

Ha Van, a gold investor told VietNamNet that the domestic gold price is 3-4 million dong per tael higher than the world price. He said that this is the most serious price increase in the history of Vietnam’s gold market

People panic

A lot of people whom VietNamNet’s reporter met yesterday said that they cannot predict the gold price.

Kim Thao, who lives in Hoang Mai District, told VietNamNet late yesterday afternoon that she came to the gold shop at 9 am but she still could not buy anything.

Thao said that she has sold $10,000 at 19,500 dong per dollar and planned to buy gold. She decided not to buy gold when the price was 32.5 million dong per tael, thinking that the price would go down in some more days. However, contrary to her prediction, the price increased to 32.7 million dong, and then to 35.85 million dong on November 8. 

“Now I really dare not purchase gold, because the price has jumped to 38.15 million dong per tael,” she complained.

“I do not understand, especially if the Government can intervene the market to force the prices down,” she added.

Binh, another gold buyer, told VietNamNet that he had to spend a whole morning to queue up to purchase gold, but the shop only sold gold in dribs and drabs. “The gold price escalated every minute this morning. The price soared by 200,000 dong per tael just within a short time, from the time you placed order to the time you got delivery,” he said.

While people panicked with the price increases, financial experts said the price increases are predictable. Tran Dung, an analyst, said: “People do not have much information about the gold price performance in the world market. But I know that experts have forecasted the gold price will continue rising to $1650 per oz from the current price of $1410.

“If the world price increases, the domestic price would go up accordingly, and go up more sharply, because the dong is losing its value against the dollar,” he said.

Pham Huyen

http://english.vietnamnet.vn/en/business/1317/gold-prices-dancing--shops-sell-gold-in-dribs-and-drabs.html

Gold and Silver Prices Signal the Destruction of the Dollar (video)

Warning! Gold Could Drop Below $500

By Alex Dumortier | More Articles 

November 2, 2010 | Comments (71)

Gold has performed very strongly over the past decade, trouncing equities and bonds in the process and handing investors who own the SPDR Gold Shares (NYSE: GLD) or the iShares Gold Trust (NYSE: IAU) handsome gains. Amid a heated debate about whether gold is in a bubble, it's worth taking a historical view to examine the risk investors are taking by paying more than $1,300 for an ounce of gold.

Gold's real return: zeroIn fact, gold appears to have eked out a small positive real return over time. Using data from the World Gold Council and precious metal dealer Kitco, I was able to construct a series of inflation-adjusted gold prices going back to 1851, according to which gold generated a historical average return of 0.7% per annum. However, even that small positive real return is a bit of a mirage resulting from the powerful gold rally we've witnessed. Indeed, as recently as 2005, gold's average real return over 154 years was zero, period.

That shouldn't be surprising: There is no reason to expect that an inert asset that produces no cash flows and has few industrial applications to accrete value. By stating that gold has returned nothing, I'm not disparaging the yellow metal; rather, it shows that the precious metalhas acted as a store of value -- over the very long term (for practical purposes, however, gold's price volatility makes it unsuitable as a store of value). That's consistent with the notion that it is an alternative currency that no government can debase.

Still, this alternative currency could be in for a big devaluation. To see why, look at the following graph of 10-year trailing real returns for gold since 1861 (based on average annual gold prices):

Sources: World Gold Council, Kitco.

Recent gains could reverseThere are two important observations to make:

1. Gold returns are mean-reverting: The alternating peaks and valleys in the graph illustrate the fact that periods of higher-than-average returns tend to usher in periods of lower-than-average returns, and vice-versa. That's not surprising since this property shows up across different asset classes, including stocks.
2. Investors who have owned gold over the past 10 years have earned a real return that is far in excess of the historical average. In fact, there is only prior period that witnessed higher returns: the bull market in gold that culminated in January 1980. Judging by gold's performance over the next two decades, that top capped off an enormous bubble.

Putting one and two together suggests gold returns going forward will be lower than the ones we have become accustomed to during the past decade. Just how severe could a reversal be? Let's take a look at the current price of gold in context. The following chart shows the average annual price of gold expressed in constant 2010 dollars (i.e., inflation-adjusted):

Sources: World Gold Council, Kitco.

Gold could fall by two-thirds!Gold is galloping ahead of its historical average (the red line)! In fact, the price of gold would need to fall by almost two-thirds to get back to its long-term average of $456/ ounce, not to mention that markets typically overshoot. That's a sobering thought if you have a significant position in gold.

Don't let the gold hucksters fool youGold is inherently a speculative asset. Despite what I wrote above, I do believe that it represents an attractive, but high-risk, speculation, as the current supply demand dynamicslook compelling. However, I can't rule out that things will turn out differently than I expect them to. If the economic recovery stabilizes and high inflation doesn't materialize, gold could decline significantly from its current level.

Let me emphasize that point: At these prices gold is no safe haven; it's an active bet on a specific scenario for the U.S. economy. Super-investor John Paulson owns gold because he believes the U.S. will experience double-digit inflation, but if that doesn't pan out, the bet could prove costly. Major gold miners that have closed out their hedges, including AngloGold Ashanti (NYSE: AU), Barrick Gold (NYSE: ABX) and Gold Fields (NYSE: GFI) would share in the pain.

Gold is now a bubbleI have been bullish on gold ever since I began looking at this market in February 2009, and I have argued against the idea that this is a bubble. As I review my thesis, I now believe it's likely that we are in bubble territory; nevertheless, I remain bullish because the conditions are in place for this bubble to continue expanding. Investors who wish to speculate on this can do so via the two ETFs I mentioned in the opening paragraph or through the following vehicles:Sprott Physical Gold Trust (NYSE: PHYS), the Central Gold Trust or the Central Fund of Canada (AMEX: CEF).

http://www.fool.com/investing/etf/2010/11/02/warning-gold-could-drop-below-500.aspx

Warren Buffett: Forget gold, buy stocks

By Ben Stein, contributorOctober 19, 2010: 2:24 PM ET

FORTUNE -- The first thing I notice on my most recent visit with Warren E. Buffett, who recently turned 80, is how incredible he looks. He would look terrific for 50; for 80, he looks like Charles Atlas. He's modest about it, as he is about everything. "It all works great," he says. "The eyes, the hearing -- everything works great ... which it will until it all falls apart."

The second thing you notice is that he is so smart it curls your hair.

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My first question, as I sit there on the couch in his office, is: "What about gold? Is this a classic bubble or what?"

"Look," he says, with his usual confident laugh. "You could take all the gold that's ever been mined, and it would fill a cube 67 feet in each direction. For what that's worth at current gold prices, you could buy all -- not some -- all of the farmland in the United States. Plus, you could buy 10 Exxon Mobils, plus have $1 trillion of walking-around money. Or you could have a big cube of metal. Which would you take? Which is going to produce more value?"

Okay, so gold is not a screaming buy to Buffett. What should a typical upper-middle-class person in the U.S. buy to prepare for retirement?

"Equities," Buffett answers without a moment's hesitation.

"The VTI?" I ask.

"That's good enough. Maybe a selection of high-dividend-paying stocks that are likely to raise their dividends. Maybe the top 100 dividend payers of the S&P 500."

Then, after a second's thought, he adds, "Well, maybe not that, but equities."

On the $64,000 question -- whether the recovery was real -- Buffett has no doubt. "Yes," he says, "it's a recovery. It's a slow recovery, but it's a recovery. We're calling back some people at Burlington Northern. We are still letting a few go in other businesses, but we see a pickup in business of heavy users of American Express (AXP, Fortune 500), in freight car loadings at BNSF -- across our businesses, we see slow recovery."

"When would you start hiring a lot more people?" I ask him.

"When demand picks up," he says. "We don't hire because we get a tax break or because someone in the government tells us to. We hire when there's more demand for what we are making or moving or selling. It's that simple."

"Where will the demand come from if a business as big as yours is being so cautious?" I ask.

"It's already coming," he says. "It's already happening, and it will pick up. Look," he adds, "we needed a really big stimulus in the fall of 2008 -- a really, really big stimulus. We didn't get it. It was a miracle that Bank of America (BAC, Fortune 500) bought Merrill for $29 when it was probably worth 29 cents if left on its own for a few days. If that hadn't happened, everything would have collapsed. The whole commercial-paper market would have stopped. Every domino would have fallen. Berkshire (BRKA,Fortune 500) would have been the last, but it would have fallen too. Ken Lewis saved the whole system for a while, until TARP could rescue it. But now we're just going to get a very slow recovery because people are still scared. But we are seeing recovery, definitely."

"How about in housing?"

"That recovery is still a long way off. That market got way out of equilibrium, and it's going to take a long while for it to get fixed."

Buffett goes into his life and childhood, but I don't see how we can make any money out of that, so I will leave that part out.

What about taxes? Buffett thinks that taxes should be raised on really rich Americans -- ones making $5 million a year, say, and especially ones making $1 billion a year.

"Why would we want to do that" I ask, "if we have a fiscal policy that is explicitly about running large deficits?"

The three of us -- Buffett, my colleague Phil deMuth,and I -- talked for a long time about the size of the deficits relative to "normal peacetime" and World War II, when they were far higher than they are even now. Then Buffett sums up his feelings about it, saying his wish to raise taxes on the very rich is really about social justice more than about fiscal policy.

"I would give anyone an exemption from the higher rates if he had a son or grandson in Afghanistan," he said. "I meet a lot of people at these conferences of rich people, of billionaires," he said. "None of them have anyone in their family in combat."

We talk awhile longer, and then Phil and Warren and I go out for a memorable Italian meal at Piccolo Pete's, which Warren considers the best restaurant in America. I look at him as he chews his meatballs. (He has perfect table manners.)

"This guy is so smart -- it's like he's a machine, but a very friendly, polite, affable machine," I think.

I keep thinking of what I would do if I had even the tiniest fraction of his money. But I never will, so I'll skip that too.

Buffett drives us back to the hotel in his lovely Cadillac. "I bought it because a couple of years ago I saw Congress giving Rick Wagoner (the former CEO of GM) such a going-over that I thought I should help him out by buying a Cadillac."

"Cadillac," I think, remembering an old Bob Dylan song. "Good car to drive, after a war."

Ben Stein is an economist, actor, lawyer, writer and quiz show host from 1988 to 1996 was a professor of law and economics at Pepperdine University School of Law. 

http://money.cnn.com/2010/10/18/pf/investing/buffett_ben_stein.fortune/