Heavy losses when gold prices fall, why do many people still buy?

Investors lose heavily if they buy gold in the short term

In recent weeks, investors have been continuously losing money if they invest in the short term. The reason for this situation is that the difference between buying and selling prices has been pushed to a high level by domestic businesses.

As of 5:00 p.m. on April 14, the price of SJC gold listed by DOJI Group was at VND80.6-83.1 million/tael (buy - sell). The difference between the buying and selling price of SJC gold at DOJI was VND2.5 million/tael.

Compared to the closing price of last week's trading session, the gold price at DOJI increased by VND1.6 million/tael for buying and VND1.1 million/tael for selling. However, if an investor buys gold at DOJI Group on April 7 at VND82 million/tael and sells it today (April 14), the investor will lose VND1.4 million/tael.

This situation also occurs at Saigon Jewelry Company SJC. The price of SJC gold is listed by this unit at 80.6-83.1 million VND/tael (buy - sell). The difference between the buying and selling price of SJC gold is 2.5 million VND/tael.

Compared to the closing price of the previous week, the gold price at Saigon Jewelry Company SJC increased by 1.1 million VND/tael for buying and 1.2 million VND/tael for selling. However, after a week, investors still lost 1.3 million VND/tael.

Domestic gold price developments. Chart: Khuong Duy

Many reasons why investors choose gold

Still profitable if investing long term

Although they lose money if they invest in the long term, domestic investors still earn large profits. Since the beginning of the year, although there have been many ups and downs, domestic and world gold prices have been adjusted to increase quite strongly.

A year ago, the price of SJC gold at DOJI Group was only at 66.65 - 67.25 million VND/tael (buy - sell). Up to now, SJC gold has increased to 80.6 - 83.1 million VND/tael (buy - sell). After one year, investors have made a profit of up to 13.35 million VND/tael.

Low interest rates, gold becomes the optimal investment channel

For many people, buying gold or saving money in banks are safe investment channels. When they have idle money, people often put it in these channels. Some other investment channels such as stocks or real estate require large capital or experience, and at the same time have a high level of risk, so they are more selective of investors.

However, in recent months, savings interest rates have been continuously adjusted downward. Recorded early this morning (April 14), the highest savings interest rate was only at 5.8%/year. Meanwhile, the price of gold has been continuously increasing recently, making gold an optimal investment channel for many people.

Top banks with the highest interest rates on the market today. Table: Ha Vy

In fact, there are still banks with high interest rates of over 8%/year. However, to enjoy this interest rate, customers need to satisfy strict conditions from the bank.

For example, ABBank lists the highest savings interest rate of up to 9.65%/year for a 13-month term, but applies to savings deposits of VND 1,500 billion or more.

Meanwhile, PVcomBank's highest interest rate is 9.5%/year for a 12-13 month term. However, this interest rate applies to a minimum deposit of VND2,000 billion.

Similarly, at Techcombank, for a 12-month term, the interest rate of 9.5% per year is applied to savings deposits with a limit of VND 999 billion or more. The condition that this bank sets is that customers commit to not paying off their deposits before the due date.

Next is HDBank with a fairly high interest rate, 8.1%/year for a 13-month term, with the condition of maintaining a minimum balance of 500 billion VND.

MSB also applies a fairly high interest rate with interest rates at bank counters of up to 8%/year for a term of 13 months. The applicable conditions are that the savings book is newly opened or the savings book is opened from January 1, 2018, automatically renewed with a term of 12 months, 13 months and the deposit amount is from 500 billion VND.

World gold prices still have room to increase

The world gold price has recently continuously conquered new peaks. For a long time, the domestic gold price has tended to adjust according to the world market, so many people believe that the precious metal will hardly decrease after the world market is still "hot".

Many experts say that world gold prices still have room to increase as demand for gold from Asia continues to dominate prices.

World gold prices are said to still have room to increase. Illustration: Tung Giang

“China continues to play a key role in driving the global gold market, with turnover on the Shanghai Gold Exchange (SGE) hitting a two-year high as gold pushed to new nominal highs,” said Colin Hamilton, commodities analyst at BMO Capital Markets.

In addition, recent geopolitical tensions have caused the Central Banks of some countries to actively buy gold for reserves, which has caused world gold prices to increase.

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