Gold rose to a record high in Vietnam this week as the metal continued to advance on the global market due to a negative economic outlook.
The price of gold surged to VND31.35 million a tael on Wednesday, compared to VND30.22 million a week before. It fell slightly to VND31.19 million on Thursday morning. A tael is equal to approximately 1.2 ounces of gold.
On the world market, gold hit a lifetime high of US$1,313.45 an ounce on Wednesday as the dollar dropped against a basket of currencies due to expectations the US Federal Reserve would take new measures to shore up the US economy.
Analysts said economic outlook concerns have increased the appeal of gold as a safe-haven asset.
Nguyen Thi Cuc, deputy general director of Phu Nhuan Jewelry Company, said the demand for gold was high on Wednesday. In the morning alone, her company sold 860 taels of gold, more than double the amount it bought.
Saigon Jewelry Holding Company, Vietnam's largest gold trader, reported sales of 2,000 taels on Wednesday morning.
Gold traders said many local investors bought a lot of gold as a stop loss strategy fearing that prices could go up further. Some traders are seeking government approval to import the metal as they say there is pressure on local supplies.
But Do Minh Phu, vice chairman of the Vietnam Gold Business Association, said in an interview published by Tien Phong newspaper Wednesday that there was no real demand for gold.
During a gold hike in November last year there were long lines of people waiting to buy and sell gold. However, over the past few days, this has not been the case, he said.
"Gold prices are definitely driven by speculators," Phu said.
Vietnam no longer has gold exchanges and the precious metal has already lost its appeal to local investors compared to other investment options, he said.
Phu said there were concerns about a supply shortage after many local gold traders boosted exports this year. But he said a scarcity of gold in Vietnam is unlikely.
The current price gap between local and international gold is around VND300,000 per tael.
As soon as the State Bank of Vietnam allows local traders to import gold, the gap will narrow, Huynh Trung Khanh, vice chairman of the Vietnam Gold Business Association, told Thanh Nien.
He said companies should be cautious if they want to borrow gold from banks and sell it to do business. Even though interest rates on gold loans are low, at around 3 percent, businesses need to consider the fact that gold has risen 32 percent over the past year.
Khanh forecast gold will hit $1,350 an ounce on the global market in the final quarter this year.
Gold is heading for a tenth straight annual advance and is "still some way from displaying the characteristics of a bubble," Deutsche Bank AG said in a report on Tuesday.