Top investment pick for 2012: gold

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Gold is the top pick for many investors for this year, as uncertainty clouds the economic situation.

Dinh Nho Bang, vice chairman of the Vietnam Gold Traders Association, told the Dau Tu newspaper that the global economy will continue to be unstable this year due to the European debt crisis and high inflation in many regions.

"Investors will seek a haven in gold and prices are expected to surge," Bang said. "Many experts have predicted gold may hit US$2,000 an ounce this year."

Gold recorded the 11th consecutive annual advance last year, after hitting a record high in September.

Economist Le Dat Chi agreed that gold is the top investment option for 2012, but warned that now is not the time to buy, as the metal could see a correction and bottom out first before rising again.

Europe is not out of the woods yet and many governments facing a cash crunch could sell gold to have more money, Chi said. The rise in supply would create a downward pressure on the precious metal, he added.

Meanwhile, the world economy is struggling and could fall into deflation, which would then lead to a higher demand for cash that will work against gold, Chi said.

Based on these predictions, he said investors should wait for gold prices to plunge to $1,300 an ounce and local prices to VND37 million per tael to start buying. Once governments increase money supply and inflation risks return, gold will rise again, he said.

Gold prices are headed into a bear market at $1,300 an ounce this year, according to technical analysis by Lance Roberts at Streettalk Advisors LLC. "The sell signal remains strong, and so there is still some time before we see more buyers than sellers," Roberts told Bloomberg. "The trend is negative, so we have to be more cautious."

Bloomberg reported that Morgan Stanley, on the other hand, also named gold among its top picks, saying bullion may average a record $2,200 an ounce.

According to a Vietweek survey of 27 investors, gold continues to be the most attractive investment option for 2012.

The sharp decline of the stock market last year caused many investors to shy away and look for other avenues like gold and cash assets. While some experts believe new plans to boost share sales at state-owned companies could help revive the stock market in 2012, others are still watching to see how effective the measures to restructure the economy will be. Some are also worried that it will remain difficult to take out bank loans to invest in stocks.

Last year, despite ups and downs due to policy changes, gold still provided Vietnamese investors a return of more than 16 percent. In comparison, the stock-benchmark Vn-Index plunged 28 percent.

Industry and Trade Minister Vu Huy Hoang said Vietnam may need to import $2.5-billion worth of gold in 2012, up 9.6 percent from last year. If the gold market can be stabilized, gold imports will be reduced sharply, he said.

The State Bank of Vietnam said in a statement on its website Monday that it has been assigned by the government to finalize a draft decree to tighten control over the gold market. According to the statement, the decree will allow the central bank to take complete charge of gold bar production, including import and export of the metal.

While the central bank will continue to recognize the right to keep gold as assets by all individuals and institutions, it is expected to restrict the use of gold as a means of payment with the new decree. The statement did not say when the decree will be issued.

The Dau Tu newspaper quoted central bank governor Nguyen Van Binh as saying that due to the policy tightening, gold will no longer be attractive to investors. "In fact it may become a risky investment option," he said.

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