Fewer turn up to buy gold this year
It's that time of the year again. Yesterday January 31 was the God of Wealth Day, traditionally marked on the 10th day of the first lunar month of the year in Viet Nam.
This year, gold shops saw far fewer people eagerly waiting outside of their doors to snatch up the precious metal, believed to be a sign of good luck for the year.
A shop owner in downtown Ha Noi said there were more customers compared to usual but far fewer than in previous years. Empty stools could be seen outside gold shops at the corners of Tran Nhan Tong and Trieu Viet Vuong, a markedly different sight in comparison to the usual hustle and bustle in previous years.
A similar sight was observed in HCM City, the country's largest economic hub.
Lukewarm customers' attitudes reflected in the price of gold seeing a sharp decline in the days leading up to God of Wealth day this year. The price of the metal, however, saw a strong rise prior to Tet.
SJC posted a buy/sell rate of VND66.30/67.72 million for a tael (37.5g), an increase of VND300,000 to buy but a decrease of VND100,000 to sell. Phu Quy's rate was posted at VND66.20/67.30 million, DOJI's at VND66,30/67,30 million.
A likely explanation, according to gold traders, was a large inventory held by gold shops after gold prices hit the VND68 million mark last month, triggering traders' sales for profit. In addition, global gold prices have been on the retreat in recent weeks.
Another factor was the tightening of money by the central bank and reduced income, putting a dam on demand this year.
Decorative gold pieces including 12 animals, especially the cat, remained popular purchases this year with customers' preferences being smaller and lighter products with prices ranging around VND2-5 million a piece.
Large gold stores also reported a large number of orders placed online during the last few days.
"Many customers placed their orders yesterday and the day before yesterday but still came to collect their purchases today to avoid the crowd and slightly lower prices," said a Sacombank-SBJ store clerk.
World Gold Council: Economic growth impacts gold consumption
Gold posted modest gains in 2022, and outperformed many other asset classes worldwide; no mean feat given an unprecedented rise in rates and a strong US dollar, Andrew Naylor, CEO of Asia-Pacific region (excluding China) and Public Policy at the World Gold Council (WGC) told Viet Nam News Agency.
“2022 was a textbook example of gold’s stable and uncorrelated performance amid market turbulence,” he added.
He said weak institutional demand was offset by retail investment - driven by inflation and geopolitics - and central banks had an exceptional year of net buying. In Viet Nam consumer demand was buoyant, as individuals looked to hedge against inflation and protect their wealth. All these factors contributed to a positive year for gold. Although gold was only up by a modest 0.4 per cent in US dollar terms in 2022, in other currencies it performed even better signalling gold’s ability to protect wealth. In Euros gold was up 6.7 per cent, in Sterling 12.5 per cent, and in Japanese Yen it was up 14.4 per cent.
“Gold can be an effective hedge against inflation and this is one of the main, but certainly not only, reasons individuals and institutions invest in gold. World Gold Council research shows that in periods of low inflation – defined as 3 per cent or less – gold’s average annual return historically has been close to 7 per cent in US dollar terms. In periods of high inflation – above 3 per cent - it is closer to 13 per cent.
He added that interest rates were a headwind – when interest rates go up gold tends to perform less well. In 2022 we saw a combination of high inflation and interest rates having opposite effects on gold. In 2023 he would expect interest rates to be priced in, and inflation, as well as geopolitical uncertainty, would be major drivers of gold’s performance.
Talking about gold demand in Viet Nam this year, he said: “In addition to the inflation story, factors affecting gold demand in Viet Nam will be robust economic growth. Viet Nam is performing very well economically and is a bright spot in the global economy. Strong economic sentiment often translates into greater consumer demand for gold.”
He said major new trend markets were seeing was the introduction of digital or online managed gold products, where consumers buy gold through the internet or an app, and the gold is stored on their behalf.
These are often attractive as they are convenient, and pricing is often more transparent/comparable with other product providers, according to the CEO.