Below is our compilation from ideas exchanged with Chairman Le Hung Dung of SJC, General Director Nguyen Thanh Long of Eximbank, and Deputy Chairman Huynh Trung Khanh of Viet Nam Gold Traders Association.
Gold is that they can not print out!
Mr. Le Hung Dung made his first words on gold price fluctuation assessing that in 40 years, gold price is now changing. Initially, he made an assessment on tight relationship of US government’s public debt to gold price. In 2010, US government’s public debt has reached USD 13,800 billion and gold price has been at USD 1,350 per ounce. In estimation, in 2011, the public debt may increase to USD 15,300 billion with gold price at USD 1,500 per ounce and USD 16,500 billion and USD 1,663 in 2012 respectively.
Gold buyers are advised to be sane with their own decision.
In 2008, Fed initiated ineffective Quantitative easing 1 (QE1) of preliminary USD 800 billion which then increased to USD 1,700 billion to rescue the economy. In the second time, Fed initiated QE2 at the cost of USD 600 billion. Experts predicted that QE2 would end up as QE1 with expanding package or more money is printed out. As the matter of fact, the cash flow is blowing up inflation not only in the US but also in other countries due to great rate differences. Thus, US dollars have lost 26% of value in 2010 while gold price has gained 37%.
Mr. Le Hung Dung noted that countries and noticeably China have set up Exchange Trade Funds (ETFs) in response to such cash flow. Up to date, China’s ETFs have bought in 2,000 tons of gold, making China the sixth greatest gold holder in the world. For such a buying rate, it is expected that China will be ranked third by 2012 as great gold holder after the USA and Germany.
Currently, of USD 2,600 billion worth in reserve, gold is only accounted for 1.7% of value or 1,054 tons in China’s foreign reserve. If the reserved amount is increased by 1.7% to 2% with frequent increase of foreign exchange, China may cause greater and regular pressure on gold supply and price, said Mr. Le Hung Dung.
Into the pric maze
Mr. Nguyen Thanh Long joined in with his reflection on unstable global finance. He compares gold price hike with stock exchange market in which gold price almost doubles Down Jones increases. By calculation of Viet Nam from the beginning of 2010, gold price has increased by 30%.
He also agreed that Vietnamese can easily fall into hoarding up gold responding to difficult times. Gold trader population is growing in the face of effective gold trading floor on which they can earn from the price differences.
“People rush in gold trading with real and fake demand for gold,” said Mr. Nguyen Thanh Long.
Long also said that jigsaw increase of gold price may open up traps to inexperienced and impatient traders who may refuse to be lost in certain stages.
Fortune favors the brave
Taking another different perspective, Mr. Huynh Trung Khanh advised people who prefer gold trading.
Firstly, he advised them to closely inspect global economic evolution through international channels for dollar index and oil price to predict gold price. Secondly, they should learn how to analyze basic graphs to identify support level and resistance level for their timely decision in trading. Thirdly, they should strictly follow their own profit threshold and lost cut.
Reported by T. Vy - N. Phuc - M. Chau – Translated by Vi Bao
