Saturday, Jan 02, 2010
Gold bubble? - Should other trading markets worry?
FT: Vietnam to put an end to gold trading
Vietnam has ordered all gold trading floors to close by the end of March, putting an end to a business which turns over $1bn a day but which the government feared was spinning out of control.
Posted by markj69 str05 @ 05:25 PM (664 views) Add Comment
9 Comments
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1. quiet guy said...
The Vietnamese government are concerned that its citizens are using highly leveraged positions to speculate in gold. I suppose you could argue that there is a local gold bubble in Vietnam, but I'm not sure how you can extrapolate that argument elsewhere.
Imagine how much pain we could have saved ourselves if our government had shut down leveraged property speculation earlier in the decade.
2. hpwatcher said...
The government are wanting to keep the local price down...now call me suspicious, but there must be a reason for that.
3. inbreda said...
They're trying to stop their currency becoming worthless. Because if that happens no-one will use it. And if no-one uses it, the government can't just print some more of the stuff when they want to buy something. It's bad enough already in that part of the world - Vietnam, Cambodia and particularly Laos are more likely to want USD instead of the local currency - given the past. I wonder if that way of thinking will ever become commonplace in the UK? I think yes.
4. quiet guy said...
Hi inbreda,
I was a bit sceptical about your idea and decided to do some Googling. First hit:
http://www.businessinsider.com/vietnam-devalues-currency-to-avert-crisis-2009-11
Yes, you're right. The Vietnamese Dong is in a bit of trouble.
@markj69 str05
This story is emphatically a sign of gold's strength when trust in government is weakened - not a bubble story at all.
5. markj69 str05 said...
'The government said it was particularly concerned that some investors had been drawn into overleveraging their positions by low interest rates and the ever-increasing price of gold , which has risen from $660/oz when the first trading floor was started in 2007 to almost $1,100/oz today.'
Not a bubble! Does that mean the Dollar has de-valued an incredible amount? And the £? What supposedly makes Gold such a stable benchmark? Why can Gold increase 66% in 2 years (07-09), and not be a bubble, whereas houses increase very little in the same period, yet they are still deemed to be well over-priced (Which I agree with)?
6. quiet guy said...
@markj69 str05
My understanding is that the pound has devalued by about 30% last year in comparison with the Euro. The dollar is a bit special because of its reserve currency status but any regular blog reader will be aware of some (ahem) issues with the way the Federal Reserve is administering the mighty dollar.
http://www.telegraph.co.uk/finance/economics/6868271/Weak-pound-starting-to-reap-rewards.html
Incidentally, I'm not saying that gold will be "stable" in the next few years - in fact the precise opposite, due to the way it is gambled by some big market players but history suggests that gold does well when governments fair badly.
Perhaps you would be less offended by the idea that the shiny stuff may be thought of as an insurance policy against government mistakes? I suppose in the end, all I can say is time will tell.
7. general congreve said...
Gold is total rubbish and the Vietnamese government in their ultimate wisdom know this. This is why they are outlawing trading gold, to save the vulnerable Vietnamese peasants from making stupid mistakes. Best keep all your wealth in inflating/devaluing Dong comrades.
Getting the picture now?
8. tenyearstogetmymoneyback said...
Isn't the main point
"The (Vietnamese) government said it was particularly concerned that some investors had been drawn into overleveraging their positions by low interest rates and the ever-increasing price of gold
Contrast this with the UK where the Government could see no problem with people overleveraging their positions in the property
market due to low interest rates and the ever-increasing price of property.
9. a saver said...
Quiet guy said 'Imagine how much pain we could have saved ourselves if our government had shut down leveraged property speculation earlier in the decade'.
If only! Not only did they do nothing to prevent HPI, they have actively encouraged it and are now shamelessly stealing the interest from our savings, trashing our currency and mortgaging our children's future to sustain it and enrich our already taxpayer-subsidised banks, thereby keeping house prices out of the reach of the younger generation. And they say that some of the Latin American countries are corrupt!