The world gold price has increased suddenly nearly 2% on 04/06/2013 which is the highest price in this week while the dollar price has decreased due to disappointing manufacturing data. After closing the session, the gold price is up18, 9USD to 1.411,9 USD/oz. The gold price rose while the dollar and stock price fell, after the report of the U.S Institute for Supply Management (ISM) was released on 3/6 shown that the ISM manufacturing index has fallen in May for 3 consecutive months, from 50, 7% in April to 49, 0% in May. This is the lowest level of almost 4 years, from 6/2009, prompting investors bet the U.S Federal Reserve Board will maintain the speed of economic stimulus.
Dollar Index, the measure of U.S currency against six major currencies, fell 0, 8% to 82,681, the lowest level in three weeks recorded the largest decline of the dollar since 10/1.
On the material market, demand remains quite strong. India, the largest gold consumer in the world, has imported 162 tons of gold in May, much higher than expected. Also, in May, sales of U.S Mint gold coins reached 70,000 ounces, after selling 209, 500 ounce in April.
IMF officials said that Vietnamese government required banks to stop mobilizing and lending gold to be effective in prompting more stable financial sector. Differences between domestic and the world gold price have increased after 2012, but the level of volatility in the gold price has declined significantly. From the fourth quarter of 2008, “the rush to find a safe heaven” in the context of the global financial crisis has contributed to the increase of world gold price.
At the same time, the level of world gold price fluctuation has increased. Increasing world price fluctuation and higher level of the world market has transmitted to the Vietnamese gold market. Then, higher level volatility of the domestic gold market is transmitted the foreign exchange market due to the relationship between two asset markets because the role of gold is the monetary assets in Vietnamese economy. The volatility of foreign exchange and gold has put the balance sheet of Vietnamese banks into the risk through several channels, including credit risk and liquidity. Besides, the asset balance sheet of banks was also unbalanced in term and currency. Also, the large gold import reduced international reserves in 2009. In the setting of a more stable financial market, finally, the world gold price began descending in the third quarter of 2012.
Solutions of Vietnamese government have been prompted by some factors to improve the performance of the market. The first is to strengthen the financial stability by decreasing the risk of banks related to assets and gold on their property balance sheet. Secondly, reducing the level of fluctuation in the foreign exchange and gold market and thereby improves the effectiveness of the currency policy. Thirdly, the government ultimately reduces the differences between the domestic gold price and the world price. Fourthly, in long term, the government expects that the foreign exchange and gold market will be more stable, and the macroeconomic stability in general will contribute to reduce the gold holding, improve the currency account balance and convert from gold to the property “for manufacturing”.
In the situation of the constant increase and decrease of gold, dollar price, what is the good and safe market for talented investors?