Should you buy or sell?

Công Luận•26/12/2023

Profit of nearly 5 million VND per tael after half a month.

Over the past two weeks, the domestic gold market has been in turmoil as the price of SJC gold has been rising relentlessly. By noon on December 26th, the precious metal had surged to an unprecedented high of 80.20 million VND/ounce for selling and 79.20 million VND/ounce for buying, an increase of 1.9 million VND/ounce for buying and 1.7 million VND/ounce for selling.

Compared to December 15th, the price of SJC gold has increased by 5.8 million VND/ounce, equivalent to 7.8%. Subtracting the 1 million VND/ounce difference between the buying and selling price, after only half a month, investors have made a profit of 4.8 million VND/ounce, equivalent to 6.5%. This is a very high rate of return.

Despite the dramatic and unprecedented rise in gold prices, investors are not rushing to trade as they did before. Bao Tin Minh Chau reported that on the morning of December 26th, at its business locations, 55% of customers were buying gold, while only 45% were selling. This ratio has remained unchanged for a long time at this gold retailer.

Gold prices have risen by nearly 6 million dong in half a month. Should you buy or sell? (Figure 1) — The price of gold has increased by nearly 6 million VND/ounce in just half a month, yielding a profit of nearly 5 million VND/ounce for buyers. Photo: Hoang Tu

Meanwhile, sellers are also in no hurry. Mr. Thanh Tung (Hai Ba Trung District, Hanoi ), who bought gold back in June 2023, said that he definitely wouldn't buy at this time. As for whether to sell or not, he'll consider it further.

“During the same period, I bought both gold and stocks. Currently, my stocks are almost flat. After deducting transaction fees, the losses are negligible, but gold is yielding good returns. However, I consider gold a safe haven and have no intention of selling unless absolutely necessary. If the price of gold continues to rise, I'll be happy with the substantial profits. If the price happens to fall, it's not a problem either, because I plan to allocate about 5% of my total assets to gold and hold it long-term,” Mr. Tung shared his investment philosophy.

You shouldn't buy gold.

Speaking to a reporter from the Newspaper and Public Opinion about the瘋狂 surge in domestic gold prices, Dr. Nguyen Minh Phong, former Head of the Economic Research Department at the Hanoi Institute for Socio-Economic Development Research, said that the sharp increase in gold prices during this period is mainly due to psychological factors.

“There are three factors that confirm the market is being driven by sentiment. These are the difference between domestic and international gold prices, the excessively high difference between the buying and selling prices of SJC gold, and the excessively sharp increase in gold prices in a single day. Currently, all three of these factors are present in the market,” commented Dr. Nguyen Minh Phong.

Besides market sentiment, the supply-demand imbalance is also one of the main reasons for the overheated gold market. Currently, demand is not exceptionally high, but supply is lower because the government is not allowing the minting of more SJC gold.

When asked whether it's advisable to buy gold at this time, Dr. Nguyen Minh Phong asserted that it's not, stating: "The price of gold has risen too high and cannot remain so. Currently, the price of SJC gold is about 17 million VND/ounce higher than the world price. This is a significant risk. Of course, those who are eager to speculate will buy. However, they will face the risk of the price falling."

Responding to a reporter from the Newspaper and Public Opinion, Dr. Nguyen Tri Hieu, a banking and finance expert, stated that the difference between world gold prices and domestic prices should be a maximum of 5 million VND/ounce, and the difference between buying and selling prices should only be 500,000 VND/ounce. If the difference is higher than these figures, the risk for investors is very significant.

Gold prices have risen by nearly 6 million dong in half a month. Should you buy or sell? (Figure 2) — SJC gold prices surged due to low supply. (Illustrative image)

Sharing Mr. Hieu's view, Mr. Phong further commented that the domestic gold price should not differ so greatly from the world price. This is a result of the administrative mechanism through the impact of Decree 24.

Decree 24 is considered to have made a significant contribution to curbing the gold hoarding phenomenon. However, during the questioning session of the National Assembly on June 8th and 9th, many delegates questioned the Governor of the State Bank of Vietnam, Nguyen Thi Hong, about the excessively high gold prices and the large difference between domestic and international gold prices.

Governor Nguyen Thi Hong stated: “During the upcoming review and evaluation of Decree 24, we will also study and listen to the opinions of delegates and seek broad input to determine how we should choose – whether multiple brands should be used to produce gold bars or a brand owned by the State Bank of Vietnam. At that time, we will assess and analyze the impact and seek opinions, certainly including those of National Assembly delegates.”

In its role as a state regulator, the Governor of the State Bank of Vietnam stated that it is ready to regulate gold prices if deemed necessary. However, according to updated data, there is not a high demand for gold bars among the public. Therefore, the bank has not intervened yet, and will only import gold to intervene if necessary.

Source