Vietnam: Gold Already Trading at $1,300 Per Ounce

Back in June of 2008 after the Cambridge House Investment Conference I wrote about how Vietnam had limited gold imports but with all the updates to RunToGold it appears the article was lost to the Internet ether. The last time I was in Vietnam to visit a few factories, including one of Nike’s (NKE), I found the people so nice and gracious, learned about the mangosteen for the first time and had the best ice cream in the whole world. And the chocolate pancakes were amazing. The extremely low prices would amaze you.

Bloomberg reported on 12 November 2009 that

Vietnam will resume gold imports for the first time since June 2008 … Five or six companies will be allowed to bring in unlimited amounts of gold [emphasis added].

The Vietnamese, like most in the East such as China, India, etc. have a severe case of gold bugitis. Vietnam, a tiny country of about 86 million people with an average per capita GDP of $1,042, is the largest gold retail investment country ahead of India. Of course, this is somewhat misleading because the GFMS distinguishes between jewelry and investment demand.

GOLD TRADING AT ABOUT $1,300 PER OUNCE

Bloomberg also reported:

The price of gold in Vietnam was 27.5 million dong ($1,539) per tael today, according to a telephone directory information service run by Vietnam Posts & Telecommunications. It earlier reached a record high of more than 29 million per tael, online newswire Dan Tri reported, citing local jewelers. One tael is about 1.2 oz of gold.

Some simple math reveals that $1,539/1.2=$1,282.50 or 29/27.5*$1,539/1.2=$1,352.45.

VIETNAM DONG EVAPORATES

The Vietnam Dong has been rapidly evaporating and losing their purchasing power. Many contracts, such as real estate sales, are being made using gold. Gold is money and is reasserting itself as currency in Vietnam. After 18 months of failed policies the helpless government has retreated from the import restrictions because the market is more powerful than governments.

CONCLUSION

Gold buyers in Vietnam have been buying gold at about $1,300 per ounce of physical gold in the spot market. The restriction on gold import restrictions by the Vietnamese government will lower the cost of gold in the Vietnamese spot market. We can assume, everything else being equal, that gold demand will increase because of the lower price.

This is almost entirely real physical gold demand and not phantom paper products like the problematic GLD ETF or other tools of the gold cartel engaged in the central bank gold price suppression scheme.

If the Vietnamese are willing to trade their paper illusions at such a discount then what happens when holders of the larger currencies that are lower in the liquidity pyramid decide to do the same? Oh wait, India already did and the gold price quickly jumped 5%. The Great Credit Contraction has just begun and the fiat currencies are hastening their evaporation.

DISCLOSURE: Long physical gold, silver and platinum no position in the problematic SLV or GLD ETFs.

Comments

[Roger Knights:]

Is it possible they're using ordinary ounces, not Troy ounces? If so, that would put their price in line with the price elsewhere.

Nov 13 08:53 AM

[Roger Knights:]

PS: What I mean is this: were ordinary ounces used in the conversion from taels?

Nov 13 08:56 AM

[wackyfunster:]

PARTICULARMEN: I don't normally like responding to posts in a negative manner, but I hate seeing people spread blatant misinformation. BRKB is NOT splitting for the general public, just for Burlington stockholders who don't own the stock in increments of $3500, so that they can replace their BNI with BRK.
I also disagree that the deal is an attempt to "calm market panic". Number one, what market panic (if Warren Buffet can calm market panic that is to occur in the future, then perhaps he does deserve to be called an 'oracle')? Number two, I think the Burlington acquisition is a fairly bearish sign... they have over $30B in property and equipment, which is a great hedge against a weak dollar and/or high inflation.

Just my 2c.

Nov 13 11:37 AM

[Trace Mayer:]

Nice Roger! You honed in on the issue: What is an ounce? A tael is 37.429 grams. There are 28.35 grams per ounce and 31.1 grams per troy ounce.

Would sure be nice if we could likewise resolve the issue: What is a dollar?

www.runtogold.com/2009.../

What in the world are we talking about Berkshire in this thread for?

On Nov 13 08:56 AM Roger Knights wrote:

> PS: What I mean is this: were ordinary ounces used in the conversion
> from taels?

Nov 13 01:13 PM

[Nathaniel C:]

This sets up a good arbitrage situation. By gold in New york and then ship it to Vietnam.

Nov 13 02:03 PM

[SW Richmond:]

I wonder if they're going to assay any bars they import?

Nov 13 03:27 PM

[Ricard:]

Very interesting article, thank you.

Nov 14 06:04 AM

[Nextel Acce...:]

don't understand, is the market that imperfect that they would overpay for Gold in Vietnam?

Nov 14 11:10 AM

[Swiftcreek1:]

Not imperfect at all, and no one was "over-paying"......This is simply supply and demand working the way it is supposed to. (with the exception that only a few firms, mostly likely "well connected" with the government, are allowed to import in unlimited quantities, and probably then only with kickbacks to the government to pay for the privilege)

(People can be truly nut ball irrational when they want something, think back to the wars over Cabbage Patch Kids or, more recently, the Nintendo WII.)

Two things can happen here. Vietnam will reach market equilibrium and gold prices will stabilize closer to the world spot price.....OR.....The situation in Vietnam is a precursor to what will happen everywhere else and the World Spot Price for gold will continue to move upwards vs. the dollar and, to a lesser extent, against other currencies as well.....

The reason I have the qualifier on Gold priced in dollars is simple. While we here in the US are watching Gold go nuts against the dollar we have to remember that some of the price increase is due to the weakness in our own currency because our government is currently enjoying a torrid love affair with the printing presses that create the Benjamin's......

A bit of math to explain.....

In early August the yen was at 97 to the dollar and gold was around $965 so our converssion price was Y93605 per ounce......

At fridays close the yen was at 89.7 and gold closed at $1118.50, or Y100330 per ounce.

So......while gold enjoyed about a 16% bounce against the dollar (1118.50/965) it only enjoyed about a 7.2% rise against the yen during the same time frame (100330/93605).


On Nov 14 11:10 AM Nextel Accessories wrote:

> don't understand, is the market that imperfect that they would overpay
> for Gold in Vietnam?

Nov 14 12:33 PM

[5142152-337:]

Nicely done, Trace!

SW: ya think?

Nov 14 04:36 PM

[auto44:]

The only thing problematic about GLD is that the commission to buy is so low that it is a thorn in the side of those selling physical gold and those charging to store it and insure it. In the words of Casey (stangle) apology for the spelling, you could look it up. The real problem is the trading and storage costs of physical gold and the danger of theft, counterfeiting, or loss from other disasters. Don't we all really know that nothing no matter what the form is risk free or fool proof. So far owning GLD has worked out well for me, but then I am not in the Armageddon/ lawless period camp but the slow devaluation inflation trying to maintain or increase my purchasing power camp. Good luck to all. Regards, Bob

Nov 14 10:43 PM

[Carlos Lam:]

On Nov 14 10:43 PM auto44 wrote:

> Don't we all really know that nothing no matter what the form is
> risk free or fool proof. So far owning GLD has worked out well for
> me, but then I am not in the Armageddon/ lawless period camp but
> the slow devaluation inflation trying to maintain or increase my
> purchasing power camp. Good luck to all. Regards, Bob

I'm glad that GLD has worked for you. There ARE reputable bullion sellers out there (Kitco, APMEX) with decades of loyal customers. While they may not be 100% reliable (what is?), their track record certainly shows them to be trustworthy.

What I don't like about GLD is my fear of counterparty risk. Simply put, I cannot go to the GLD office and ask to inspect all their gold. Of course, if all holders did this, it would cause a logistical nightmare. Instead, they have audits of their gold. This does not decrease my fear: I still cannot ensure that the gold is all there.

Both physical gold and ETFs have their pluses and minuses. You're more comfortable with the ETFs; I'm more comfortable with physical gold. The buyer has to understand the pluses and minuses and plan accordingly.

Nov 15 07:03 AM

[User 515941:]

the market is always like this up and down get use to it but gold from Vietnam that's hilarious prices. I guess gold does have the advantage overall.

On Nov 14 12:33 PM Swiftcreek1 wrote:

> Not imperfect at all, and no one was "over-paying"......This is simply
> supply and demand working the way it is supposed to. (with the exception
> that only a few firms, mostly likely "well connected" with the government,
> are allowed to import in unlimited quantities, and probably then
> only with kickbacks to the government to pay for the privilege)<br/>
>
> (People can be truly nut ball irrational when they want something,
> think back to the wars over Cabbage Patch Kids or, more recently,
> the Nintendo WII.)
>
> Two things can happen here. Vietnam will reach market equilibrium
> and gold prices will stabilize closer to the world spot price.....OR.....The
> situation in Vietnam is a precursor to what will happen everywhere
> else and the World Spot Price for gold will continue to move upwards
> vs. the dollar and, to a lesser extent, against other currencies
> as well.....
>
> The reason I have the qualifier on Gold priced in dollars is simple.
> While we here in the US are watching Gold go nuts against the dollar
> we have to remember that some of the price increase is due to the
> weakness in our own currency because our government is currently
> enjoying a torrid love affair with the printing presses that create
> the Benjamin's......
>
> A bit of math to explain.....
>
> In early August the yen was at 97 to the dollar and gold was around
> $965 so our converssion price was Y93605 per ounce......
>
> At fridays close the yen was at 89.7 and gold closed at $1118.50,
> or Y100330 per ounce.
>
> So......while gold enjoyed about a 16% bounce against the dollar
> (1118.50/965) it only enjoyed about a 7.2% rise against the yen during
> the same time frame (100330/93605).

Nov 22 05:09 AM