Where does cheap money go?

Money flows into the bank

Although savings interest rates are at their lowest level in the past 3 years, idle money is still taking refuge in this channel. According to data from the State Bank of Vietnam (SBV), in September alone, the amount of deposits from economic organizations increased quite strongly with 217,000 billion VND, up to 6.23 million billion VND. The growth rate of deposits from organizations is faster than that of residents in recent months. In September, deposits from residents only increased by 16,000 billion VND, while banks attracted more than 6.449 million billion VND. In addition, the proportion of cash in circulation in September also decreased to 8.53% from 8.7% in August.

Gold ring prices increase sharply in 2023

Interest rates are too cheap, part of the cash flow in the market is looking for investment opportunities in the new year. Ms. Thanh Dieu (District 10, Ho Chi Minh City) said that by November 2023, the savings book of 2 billion VND will mature, the savings interest rate will be 6%/year for a 12-month term instead of nearly 10%/year before, so she is looking for other investment opportunities, in which real estate is the top priority. Ms. Dieu hopes that with many solutions implemented in the past time, plus loans for real estate also decreasing, the possibility of this market will soon recover. "I am hunting for cheap real estate, this takes a lot of time, so I hope that in the first months of the year I will find a house and land that I like. This idle money is temporarily deposited in the bank," Ms. Dieu said.

Hunting for cheap real estate is also the mentality of many people at the current time of cheap capital. Ms. NH (District 3, Ho Chi Minh City) said that the prices of new projects have not decreased, even increased, but the prices on the secondary market have decreased quite sharply. Even if you are lucky, meeting someone who is short of capital, you can buy real estate at a good price. "I have a little capital deposited in the bank for several years now, but now the interest rate is too low, so I am looking to buy an apartment to rent out for monthly market money. Many new projects have been in place for several years but the prices have decreased quite sharply, buying at this time is a good price. Later, when the market recovers, the prices will also increase, there is no loss going anywhere," said Ms. NH.

Meanwhile, Mr. Nguyen Huu Huan (Ho Chi Minh City University of Economics) said that people are still not bold enough to invest money, so even though the interest rate on bank deposits is below 6%/year, they still choose to deposit money here. Therefore, the idle money flow hiding in savings channels is probably at the top of the list. "In channels such as stocks and real estate, there has not been a clear recovery. The liquidity of the real estate market is still low, supply and demand are still out of phase, so many people are still not bold enough to participate. In stocks, investors are still hesitant, exchange rates are difficult to predict... However, depending on each person's risk appetite, they see opportunities to "catch the bottom" in these investment channels," said Mr. Huan.

Financial expert Nguyen Tri Hieu predicts that the real estate channel will warm up in 2024. This market has many supporting factors such as interest rates are cooling down and returning to the pre-Covid-19 period; legal and institutional problems are gradually being resolved; planning at all levels is being completed; public investment and infrastructure development are being promoted. In the long term, real estate is still a good investment channel because Vietnam's economy is developing, along with high housing demand. "Many people are still waiting for prices to decrease before participating, but prices are unlikely to decrease deeply when the supply on the market is not much and construction costs are high," Mr. Hieu assessed.

Gold still increases over the years

Gold is currently in a booming phase as prices are constantly increasing, so many people choose to save each tael to save and preserve capital. Ms. Thuy Anh ( Hanoi ) said she has a "fate" with gold, but in reality she does not know how to evaluate where to make more profit or less profit. Having saved more than 60 million VND, she decided to buy gold for convenient storage and use when needed. "Buying gold is good for keeping, but keeping cash is easy to spend, and gold is too lazy to sell, so it's still there. A few years ago, because I didn't have enough money to buy a tael of SJC gold bars, I bought 6 taels of gold rings on the occasion of the God of Wealth's day for more than 33 million VND. Since then, every time I have a few million VND, I save enough to buy 1 tael to keep. Up to now, it has increased to more than 30 taels of gold. I don't know how much capital I spent to buy that much gold, I only know that each tael costs about 5.5 - 5.8 million VND, so with the current price of 6 - 6.2 million VND/tael, I've made a profit," Ms. Thuy Anh calculated, but also admitted that seeing the price increase made me feel lucky and blessed, so I was very happy and had no intention of selling.

In 2023, the price of gold rings increased by more than 7 million VND per tael, to 61.5 - 61.8 million VND for selling, and 60.2 - 60.5 million VND for buying. The price increase rate of gold rings is faster than that of gold bars, at nearly 13%. Meanwhile, SJC gold bars increased by more than 5 million VND/tael, equivalent to 7.4%.

Looking back over the past decade, gold has more than doubled in price, from nearly VND35 million per tael of SJC gold bars to VND72 million (a record high of VND74 million in March 2022). Accordingly, from 2013 to 2018, gold prices only fluctuated around VND35 - 36.5 million/tael. In the following years, gold prices increased quite strongly from 9 - 31.5%/year, the strongest increase was in 2019 with 31.5%, equivalent to more than VND13 million/tael. From 2020 to 2023, the average price of SJC gold bars increased by about VND5 million/tael each year. Therefore, those who keep gold as a habit all make a profit.

Mr. Nguyen Ngoc Trong, Director of New Partner Gold Company, said that in recent years, gold rings have gradually attracted more attention from the market. In terms of price, gold rings with the same quality as gold bars are 10-11 million VND/tael cheaper, and buyers spend less capital. Compared to other investment channels, gold holders in the past year have also made a lot of profit. Currently, gold prices have increased sharply in the last months of the year when the international gold price increased by over 2,000 USD/ounce (up 180 USD/ounce compared to the beginning of the year, equivalent to an increase of 9.8%). The reason for the high price of gold is that the USD has decreased in price due to the news that the US Federal Reserve (Fed) will cut interest rates in the near future. The Fed has had a cycle of raising interest rates that has lasted from March 2021 to now, with interest rates from 0% to over 5%/year. In 2024, the Fed is expected to cut interest rates and if this happens, the USD price will go down and gold will benefit from further increases. In addition, many geopolitical information in countries is also supporting the increase of gold. That is why many people still keep the habit of saving each tael of gold and still make a profit.

It can be seen that although savings are still the strongest money-attracting channel, falling interest rates are also causing idle money to be considered flowing to other investment channels.

Domestic gold prices will follow international prices, especially gold rings. However, people need to be cautious when buying gold because domestic prices are not linked to foreign prices, "one market, one market", and increase and decrease unpredictably. For many years, SJC gold bars have been 10 million VND/tael or more higher than international prices, sometimes up to nearly 20 million VND/tael; at the same time, people should not choose times when prices increase sharply and fluctuate continuously to hold.

Mr. Nguyen Ngoc Trong, Director of New Partner Gold Company

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