Gold prices rise but buyers still lose money
On July 5, domestic gold prices surged sharply after many volatile sessions. SJC gold bars were commonly listed by businesses at 148.4 million VND/tael for buying and 151.4 million VND/tael for selling, an increase of 3 million VND per tael in both directions.
World gold prices also recovered to above 4,170 USD/ounce after job data in the US was less positive than forecast, causing the USD to weaken and expectations of the US Federal Reserve (Fed) raising interest rates to decrease.
However, the increase in recent sessions is not enough to help gold buyers in the previous high price zone escape losses. Compared to the God of Wealth Day on February 26, the current SJC gold bar price is still tens of millions of VND lower per tael.
On God of Wealth Day, SJC gold bars are commonly listed at 182-185 million VND/tael. With a selling price of 185 million VND/tael, people with 500 million VND can buy 2 taels and 7 chi of gold, costing 499.5 million VND and leaving 500,000 VND.
By July 5, the business bought back SJC gold bars at a price of 148.4 million VND/tael. If selling all 2 taels of 7 chi, the owner would earn about 400.68 million VND.
Plus the initial surplus of 500,000 VND, the total remaining amount is about 401.18 million VND. Thus, although gold prices have just increased sharply, buyers in the above situation still temporarily lose about 98.82 million VND, equivalent to nearly 19.8% of capital.
The loss is greater than the decrease calculated in the same direction as the selling price, because people buy gold at the price the business sells, but when selling, they have to accept the buying price. The buy-sell gap currently at 3 million VND/tael continues to increase the time needed for buyers to return to the breakeven point.
It should be noted that nearly 100 million VND is a temporary loss if the gold is valued according to the purchase price on July 5. If the owner has not sold and continues to hold it, the loss has not been realized. The final result depends on the gold price at the time of sale.
Do not rush to consider the decline as a bottom-fishing opportunity
Talking to Lao Dong Newspaper, Ms. Le Thi Huong Tra, Institute of Banking Science Research, Banking Academy, said that the current gold price movement cannot be explained only by the USD and real yield.
According to Ms. Tra, the USD and real yield are still important "anchor points" in the short term. As the USD strengthens and real yields increase, the opportunity cost of holding gold increases, causing precious metals to often be under downward pressure. However, gold is currently also supported by geopolitical risks, the trend of foreign exchange reserve diversification, the buying demand of central banks and the downward psychology of dependence on some key reserve currencies.
Regarding the domestic market, lecturers at the Banking Academy believe that gold prices decrease not only due to the impact from the world but also influenced by policy expectations. When management agencies signal market stability, improve legal supply or narrow the gap between domestic and world prices, the difference formed from scarcity and speculation sentiment may decrease rapidly.
The fact that businesses stretch the buying-selling spread also shows an increased risk of volatility, while also causing individual investors to bear higher transaction costs.
I think we should not rush to consider the decline as an opportunity to'bottom-fish'. Investors need to avoid buying according to crowd psychology, do not use borrowed capital, do not pour too much weight into gold and especially pay attention to the risk of the price difference between domestic and world prices continuing to narrow" - Ms. Tra recommended.
From now until the end of the year, Ms. Tra believes that investors should approach gold as a channel to preserve asset value and hedge risks rather than a short-term speculative tool. The appropriate strategy is to allocate a moderate proportion, use idle money and buy in installments according to adjustment phases instead of chasing purchases.
Investors should also not surf when the buying-selling range is wide, because transaction costs can significantly reduce expected profits" - Ms. Le Thi Huong Tra noted.
Today, the difference between domestic gold prices and converted world gold prices is fluctuating in the range of 18.3 to 19 million VND/tael, depending on the exchange rate and the specific selling price of each brand.
The world gold price converted above has been calculated according to the current USD/VND exchange rate at Vietcombank (about 26,463 VND/USD) but does not include taxes, import fees and special processing costs of the domestic market.
