17 June 2013

Gold Premiums in Vietnam Hit $217 Over Spot In Heavy Demand

I think you have had to experience a collapsing currency first hand in order to truly appreciate the fundamentals of monetary value, and how these things can take on what seems like a force of nature.

I was doing business in Moscow during the 1990's, and saw the slow motion collapse of the rouble. Or at least it seemed like a slow motion collapse at first, until it gained quite a bit of momentum despite the measures the State took to maintain their 'official rates.'

Russia had a sovereign currency, right?  And so does Vietnam, and many of the other countries that experienced extraordinary currency depreciation, otherwise known as monetary inflation, since WW II.  Perhaps they just needed some better monetary theorists, or official enforcers with hairier knuckles. Their financial elite seems to have had plenty of false bravado.

But then again, they were not us. We are different. We are unique. We are the masters of all that we survey and purvey, the beauty of the world, the paragon of animals.  London and New York are where the elite meet to eat.

Here is what is happening with gold prices in southeast Asia now.  Ding dong.

This from Goldcore:
The Vietnamese Central Bank sold another 25,700 taels (1 tael = 37.5 grams or 1.2 troy ounces) at a gold bar auction on Friday in order to try and satiate the massive public demand for gold in Vietnam.

The Central Bank hopes that the sale of gold into the market will reduce the very high premiums paid by gold buyers in Vietnam, the largest buyer of gold in Southeast Asia after Thailand and one of the largest physical buyers of gold per capita in the world.

Vietnamese people hold gold as a store of wealth for protection against war, inflation and currency depreciation. In recent months, the bursting of bubbles in the stock market (see chart) and property market and the continuing devaluation of the dong has led to record demand in Vietnam and a surging premium over the spot price of gold.

Today, the premium was close to 5.5 million dong which is the equivalent of a very high premium of $217 per ounce over spot.