The escalating price of gold

Together with the local real estate market, gold prices also reached the peak in 2009. The average gold price in 2009 was 24 percent higher than the previous year’s figure.

The domestic gold price mostly depended on that of the global market. Notably, at certain times, the price in Vietnam was higher than on the international market. For example, gold sold locally at nearly VND20 million/tael on March 20 increased to more than VND21 million/tael by mid-June and reached VND23 million/tael a few months later. In the third and fourth quarters of 2009, the gold price hit a record high of more than VND29 million/tael.

On November 11, in Ho Chi Minh City and Hanoi, gold suddenly jumped to VND29.3 million/tael, creating a fever on the local gold market. It’s worth noting that when the price went up, a lot of people got involved in gold trading, but when the price dropped, they hesitated to buy or sell.

During these days when gold hit a record high, the State Bank of Vietnam (SBV) allowed commercial banks and businesses to import gold from foreign countries to stabilize its price on the domestic market. SBV Governor Nguyen Van Giau affirmed that fluctuations in the local market could not be attributed to imbalance between supply and demand. The SBV’s decision to import several tonnes of gold only provided buyers and sellers with a placebo. This was a timely decision that showed the bank’s experience in intervening in the market, he added.

Economists predicted that the price of gold would continue to rise in 2009, but not as suddenly and sharply as it did last year.

Sharp increase in cost of USD

Like the gold market, the exchange rate between VND and USD experience a considerable increase in mid-November 2009, reaching nearly VND20,000/USD.

To deal with the situation, the SBV adjusted the inter-bank rate carefully and intensified effective intervention measures. The Bank sold USD to credit organizations suffering a shortage of foreign currency and gave priority to import items that serve production activities.

On December 23, the Prime Minster asked seven Groups and State-owned Corporations to sell their foreign currency to credit organizations.

Dr Dinh Tuan Minh from the Economic and Policy Research Centre of the National University, says that the Government’s timely intervention has stabilised the foreign exchange market, especially the free market. Mr Minh concludes that the Government’s policies have been made full use of to reduce the VND/USD rate on the free market by between VND1,000 to VND2,000.

Housing market fluctuates

The real estate market swung into gear in 2009. This is a sensitive market as it relates to several other markets, such as banking, securities, gold and construction materials.

In Ho Chi Minh City, in the first half of this year more than 5,000 flats were on sale with the average price declining around 5-7 percent compared to the fourth quarter of 2008. In Hanoi, in the first months of the year, nearly 1,500 flats were on sale but only a few transactions were successful.

However, since the second quarter, the real estate market began to warm up, catching fire in September, October and November. Land prices in Ho Chi Minh City increased by 20 percent against the same period in 2008. More than one month ago, a thousand of people in Hanoi lined up to purchase flats, pushing prices up. The price of many high-grade building flats rose by VND10-15 million per sq.m Land prices also went up by 20-30 percent compared to previous months. People mainly purchased houses for speculation, so the price rise is virtual.

Since late November, the real estate market in Hanoi stayed the same. Transactions and the prices of land and houses in some areas began to decline slightly. Ho Chi Minh City saw the similar situation because of adjustments in credit and the implementation of the Law on Personal Income Tax for real estate transactions as from September 26. At the same time, many businesses built houses for poor and low-income earners, helping reduce the “heat” on the real estate market.

Phan Thanh Hung, general director of the Petrolimex Real Estate JSC forecasts that the real estate market in 2010 will be more stable than in 2009. However, the stability will much depend on the State’s macro-policies on taxes, interest rates, the exchange rate, the securities market, and the gold market. A draft law on house and land taxes which will be approved at the 7th session by the National Assembly in mid 2010 will create a legal framework to combat speculation in land and housing.

2009 closed with swift fluctuations on the gold, foreign currency and real estate markets, demonstrating that the State’s timely and flexible intervention is an important factor in bringing this sensitive market back on track to help stabilise the macro-economy.

Rol.vn - Source: VOV News