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Saturday, June 22, 2024

How to deal with gold market volatility

By Dr. Dinh Truong Hinh - Dr. Pham Do Chi

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Regarded as a symbol of wealth, a safe haven asset, and a cultural heritage, gold plays an important role in Vietnamese society. However, the Vietnamese gold market faces structural issues that lead to price volatility, affect economic stability, and expose consumers to financial risks. This article attempts to analyze the structural factors of the gold market, identify the drivers behind the recent gold price spikes, and propose five measures to stabilize the market for a more sustainable financial environment. Structural issues hindering the market There are several structural factors that lead to the instability of Vietnam’s gold market. These include: – Limited investment options: Vietnam’s developing financial system lacks many safe and attractive investment tools. With low trust in the stock market and low bond yields, many Vietnamese turn to gold as a safe haven, especially in times of economic uncertainty. – High dependence on physical gold: Unlike developed markets where gold transactions mostly involve derivatives and ETFs, Vietnam heavily relies on physical gold and jewelry. This demand for physical gold piles pressure on domestic gold prices, making them susceptible to global market fluctuations. – Fragmented market structure: Vietnam’s gold market lacks a centralized exchange, with numerous small-scale gold shops […]
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