Gold export surges on wider price difference....

In June, the local gold price was VND400,000-500,000 lower than the global level, creating a golden chance for bullion traders to boost export of the precious metal.

In a sense, the upsurge in gold export helped narrow the trade deficit in June to a mere US$160 million in June compared to levels close to US$1 billion seen in previous months, and also helped keep the foreign exchange rate stable.

In the January-June period, Vietnam exported over US$1.2 billion worth of gold, according to customs.

Given the current material gold price at US$50 million per ton, gold export volume was estimated at about 14 tons in June alone and over 24 tons in the first half this year.

The strong gold export tempo continued into July. Lao Dong newspaper on Monday reported gold companies in HCMC in the past week had exported about US$300 million worth of gold.

However, the trend will slow down in the near future as the difference between local and global gold prices has been narrowed to less than VND100,000 per tael now given stronger domestic buying energy now. A tael equals to 1.2 troy ounces.

As the global gold price exceeded the level of US$1,600 on Monday, the local gold price on Tuesday morning rose to VND39.52 million per tael, then hit the record of VND39.71 million before ending the day at VND39.64 million a tael.

Though customers pushed up gold selling on Tuesday, signs were also emerging of a rising buying power.

Nguyen Cong Tuong, deputy head of sales at Saigon Jewelry Co. (SJC), said that the buying energy was stronger on Tuesday morning, which made the local gold price rise further mid-day when the global price slightly decreased.

These signs give way to a concern that the country will be short of gold when local people rush to buy gold again while the central bank does not permit traders to import gold.

Le Tham Duong, head of the business management faculty at the HCMC Banking University, said that a strong increase in gold price may trigger speculation and smuggling in the future which would pile up pressure on the foreign exchange rate like in the past.

In addition, the credit growth in the U.S. dollar increased by a staggering 23.47% in the first six months of the year compared to 2.76% of credit growth in Vietnam dong, and most of the dollar loans will be due by the year's end, which all can lead to a surge in dollar demand. This situation plus gold smuggling will create strong pressure on the forex rate.

The strong increase in gold price is expected to impact other investment channels like real estate, stock, and bank savings.

While the real estate market has been frozen and stock indexes have fallen continuously, the high profit from gold investment – as much as 4.5% or VND1.7 million per tael in the past ten days only – will lure investors into the safe-haven asset again, Duong said.

The banking industry will feel the pinch as well. Duong said attractive gold investment could harm the central bank's attempt to gradually ease the lending rates for enterprises.

By Thuy Trieu - The Saigon Times Daily