Gold price skyrocketing, market being frozen - Tuesday, November 30, 2004

http://www.bvom.com/news/english/news/index.asp?.sequence=28683&.this=55

The price of SJC gold in Ho Chi Minh City stood at VND8.65 million per tael (bought in) and VND8.7 million per tael (sold out) on 11/29, rising 16.1% as against the lowest price recorded on 05/11.

This can be attributed to USD devaluation on the world market and speculators’ shift to the precious metal. The US Fed says the green back has depreciated 10% during the past ten months.

Despite skyrocketing price, gold trading is so quiet on the domestic market. Mr. Nguyen Huu Thanh, Deputy General Director of the Saigon Jewelry Company (SJC) attributes the situation to limited payment demand, frozen real estate market. This month, gold sold out by SJC reduces 50% as against the average level posted in quarter three.

<snip>

Meanwhile, gold companies have been resistant to import gold for fear of big risk. During the first 11 months, domestic gold businesses have bought 700,000 tonnes of SJC gold, up 142% y-o-y. Currently, SJC gold bar accounts for 80% the total gold bars being traded on the domestic market.

tick, tick, tick, tick

On the Ho Chi Minh City commodities exchange?

This is minor league, junior varsity stuff.

Who cares?

It also says something else: nobody believes the US will continue to honor its treasury commitments.

The price of gold is a bet that the US Treasury will default.

Vietnam sets up arbitrage opportunities for others to buy gold in HK, London, or NYC and sell in Ho Chi Minh....the arbitrage will get closed out, but it will meet half way...well probably not half way...but it could move up a few more percent worldwide to close out the arbitrage.

Remember also, that Thailand devaluing their currency in 1997 sent shockwaves throughout the entire global market if you remember the "Asian Contagion" back then. It was a big hiccup on the down side dutring the 10 year bullrun our market and many of the worlds' market had.

if things keep progressing we may see it again!!!

Buy real quantities of gold now. This time, it's for real.

...utlimate risky commodity. It valuable because we agree it is. There's nothing intrinsic in gold that makes it valuable any more. Which makes it ripe for being a tulip bubble.

just because it does, too. At the end of it, I would rather have a chunk of metal than a bunch of paper =). Your point is well taken, though.

than a brick of gold.

If you're going to have faith in something, currency makes more sense than gold.

The article sort of said that you have to suspend your sense of disbelief when you think a dollar has value, but you REALLY have to suspend your sense of disbelief to think there will be a market for gold that gives it value. People don't need gold. It's not easy to divide up. It isn't used in very many products, and mining has become really efficient at getting it out of the ground (plus, it's increased in value by 0% since 1980).

Economics 101 my friend: A thing is worth what the next person is willing to pay for it. The fact that Gold has depreciated over the last few decades is not indication of future performance. It marks a period of generally strong dollar and respect for US policies. The dealer is now weak and the world is of no mind to help because of our policies.

Also, when its time to flee the country its easier to bribe the border guards with real gold than with worthless paper money (that advice comes from my refugee grand-parents who did make it to this country while so many died at Hitler's hands.

psychology more than reality.

Maybe border guards will really be looking for food, not gold. Or by Euros. Or by salt.

but a brick of gold will buy you a whole lot more ;->

fyi: perception is reality

:hi:

THE FINANCIAL PAGE

WHY GOLD?

Issue of 2004-11-29
Posted 2004-11-22

... In the speculative imagination, gold remains the best hedge against Armageddon.

It also remains a testament to the tenacity of popular delusion. What is gold, after all? Strictly speaking, it’s a commodity, like oil, steel, or lead, albeit not an especially useful one. There’s a steady but small demand for gold as an industrial product—for consumer electronics, computers, and dental work—and as jewelry, particularly in India, which now buys twenty per cent of the world’s annual gold output. And there’s a steady supply. Since 1970, world production has nearly doubled, thanks to mining companies that tear up mountainsides every year in search of it.


Yet the price of gold has little to do with these two variables. To true believers—known as “gold bugs”—the idea that gold is a commodity is rank heresy. They prefer to think of gold as the planet’s most reliable currency, a stable, ineradicable source of wealth, whose value will endure no matter what comes to pass.

{But gold's buying power has DIMINISHED since 1980}

...

{We've been conditioned by myth to think of gold as money.}

... The idea of gold as a platonic currency, universally valuable across time and space, reflects a basic distrust of markets, a fear that in a world of paper money wealth is just an illusion. For gold bugs, paper money turns us all into Wile E. Coyote—we’re running on air, and we’ll plummet once we look down and realize there’s nothing holding us up. The gold bug’s apocalyptic mentality maintains that someday the global economy will look down and the result will be chaos. Gold is the only thing that will still be valuable after the bottom drops out.


Yet gold is valuable only as long as we collectively agree that it is. It may be soft, shiny, durable, and rare, but it has no more intrinsic value than feldspar or quartz. Just because it has a long history of being used as money doesn’t mean that it has a future. In the end, our trust in gold is no different from our trust in a piece of paper with “one dollar” written on it. The value of a currency is, ultimately, what someone will give you for it—whether in food, fuel, assets, or labor. And that’s always and everywhere a subjective decision. Gold or not, we’re always just running on air. You can’t be rich unless everyone else agrees that you’re rich.


Gold investors like to pride themselves on being sober realists. The irony is that buying gold is the purest form of speculation. If you invest in a company, you’re investing in machinery, technology, and people. If you buy steel, you’re investing in something that people need. But if you invest in gold you’re basically betting that someday a greater fool will come along, who thinks gold is worth more than you do. You’re buying into a collective hallucination—exactly what those dot-com investors did in the late nineties. One could say that gold is the biggest, most durable bubble in history. Someday, even this one may pop.

— James Surowiecki


http://www.newyorker.com/talk/content/?041129ta_talk_surowiecki

"There's nothing intrinsic in gold that makes it valuable any more".

Gold is beautiful. Anybody that has held gold in their hand will not deny its beauty, its feel.

Gold has uses in industry and electronics.

Lastly, Gold is limited in its supply. It cannot be counterfeited and printed in unlimited supplies. Unlike 'promises' from kings about what they will do for you, Gold does not lie. You either have it, or you don't.

This makes Gold the ultimate currency.

During economic instabilities which come with social instabilities, history has shown time and time again, people will accept gold when all other forms of money are rejected.

You may state that Gold's value is illusionary, but then again the value of ALL money is an illusion. As long as society creates a device for valuing economic transactions, gold will have a place as that device.

Nomatter how we wish we could wave a wand and presto value is created, I am sorry, value must be created with work, and gold will measure that work. Gold is the ultimate 'good', if you will.

precious, limited resources (with which we can do more useful things). And, like the article says, the value of gold requires that you think the past will repeat itself -- that people will always feel the same way about gold. But it's very possible that people will collectively agree that gold isn't the the thing everyone wants the most.

We will see.