September 23, 2017 20:13

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World’s economic risks and political instability make investment in gold a safe channel

08:06 | 13/09/2017

VCN - Before the fluctuation of gold price in the recent time, especially in the world’s economic and political situation has a lot of changes, a Customs newspaper reporter has a talk with Dr. Le Xuan Nghia , Member of the National Advisory Council for Monetary Policy , former acting Chairman of the National Financial Supervisory Commission.

worlds economic risks and political instability make investment in gold a safe channel
TS Lê Xuân Nghĩa.

What do you think about gold price in the recent time?

The increase and decrease in the price of gold bar in Vietnam have been strongly affected by the world market. The risks and instability of the economy, politics everywhere make gold an attractive investment channel which meets the criteria of safety and risk prevention.

For example, when the UK agreed to leave the European Union (EU) with 51.9% of the vote, which is the main reason for the gold price skyrocketing. That day, the opening price was at $US1,256 / ounce, then rose to $US 1,360 / ounce in several transactions - the highest price since July 2014. In Europe, the price was around $US 1,310 / ounce. The strong fluctuations in the world market caused the domestic gold price to be forced to increase but also increased the trading band to 700,000 VND / tael.

According to statistics, in 2017, the State banks of countries have been actively buying gold to increase the proportion of gold reserves in the national foreign exchange reserves. Particularly, Russia has bought nearly 93,62 tons from the beginning of the year to May 2017, bringing its total gold reserves to 1,708 tons, ranking seventh among the countries which have the largest gold reserves in the world. By May 2017, China's total gold reserves were 1,842.6 tons, ranking sixth. Germany has brought home 300 tons of gold stored in the Fed's gold warehouse. The United States has the largest The United States has the largest gold reserves in the world with 8,133.5 tons, accounting for 75.1 % of the national foreign exchange reserves. So the US will have a big impact on gold price through the Fed.

Why has the gold price increased and decreased continuously in the recent time, sir?

The increase in gold price in the recent time was due to the over the past few days is due to escalating tensions between the United States and North Korea, which directly affected the world’s gold price in the last weekends because investors bought a lot of gold to prevent the war on the North Korean peninsula.

Secondly, the decrease in the gold price in the recent time was due to increase in USD price against other currencies. In June 2017, the Fed decided to raise the core interest rate by 0.25 from 1.0 to 1.25%. Previously, the Fed has raised interest rates twice in December 2016 and March 2017. This has shown that the Fed will likely continue to raise the core interest for the third time in the near future. In addition, as the gold is priced in USD, the increase in USD price after the FED’s meeting also impose more pressures on the decrease in the price of this precious metal.

What do you think about the gold market from now to the end of 2017?

As the above analysis, in the long term, the State banks of countries will continue to buy gold raise the gold reserves. However, the purchasing of gold of State banks will not impact as strong as the Feds. I should closely monitor all moves of the Fed, it is likely that the Fed will raise interest rates, which will significantly affect the decrease in gold price in 2017.

In addition, it is necessary to closely monitor the political and economic situations of the above countries and closely follow the tendency of gold purchasing for reserves of the State banks predict the fluctuation in the short term.

By Dinh Thien/ Huyen Trang