In the last four months Hanoi resident Anh Nguyet has been borrowing VND4 million (US$154) a month to buy a 10th of a tael of 37.5 grams of gold.
The 28-year-old, who paid little attention to the safe-haven asset before, has been drawn to it since prices soared past the VND100 million mark. “As soon as I get my salary I buy gold, borrowing more if I am short.”
She firmly believes “today’s peak could be tomorrow’s low,” and is prepared to take the risk. The daily gold price fluctuations now dictate her emotions amid a fear of missing out, she says.
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A person holds a gold bar at a jewelry shop in Hanoi. Photo by VnExpress/Quynh Nguyen |
Nguyen Tuan and his wife in Hai Phong City are in a similar situation. Three years ago they borrowed VND200 million to renovate their home. With the debt now due, the two taels of gold they have saved remain untouched in their safe.
They hesitate to sell, fearing prices will climb further. The couple has decided to obtain a new loan to pay off the old one, never mind the VND1 million interest per month.
Tuan believes paying the interest is preferable to selling gold at a time when its price is soaring, which might also prevent them from buying again in future.
The couple even earmark half their VND20 million monthly income to buy more gold, even if it means cutting down on entertainment and shopping for their two children.
“Bank interest rates are low, while salaries cannot keep up with inflation and other investments require capital and expertise we do not have,” he explains. “Gold is easy to buy and sell, and it is rising.”
The experiences of Anh Nguyet and Tuan’s family reflect a broader trend. Many are caught up in the frenzy and the more gold prices rise, the more people seem to buy.
On Tuesday prices soared to a historic peak of VND124 million per tael, representing a 45% rise since the beginning of the year. It has since fallen by 2.5%.
Ngo Tri Long, former director of the Institute for Market and Price Research and a market analyst, says the surge in demand for the metal is caused by several factors.
For people with limited investment options, gold has become an appealing way to grow their wealth when other income sources fail to outpace inflation.
He says many people have the “fear of missing out” syndrome. “Many regret not buying gold earlier and now rush to buy at current prices, regardless of the risk of prices reversing.”
People holding gold are also restless, waiting for higher prices but also fearing prices could drop before they sell, he says.
Analysts blame herd mentality but also point out that low bank interest rates make gold a more attractive asset.
Limited financial literacy causes many to act on rumors and vague expectations rather than informed analysis, they say. The result has been long lines of people queueing up outside major gold shops.
A VnExpress survey of gold retailers in Hanoi found that most exhaust their stock of gold bullion and plain rings by afternoon everyday.
Buyers are forced to book an appointment for the next day, arrive early to secure a queue token and are told they can only buy a certain quantity. Many wait for hours to buy just a 10th or two of a tael.
End of a rainbow
The gold rush has left many in difficult financial straits. Anh Nguyet’s, who has been living with mounting debts to buy gold, remains convinced nevertheless that “the longer you hold gold, the more valuable it becomes” and plans to borrow money from her parents to buy more if prices keep rising.
Tuan and his wife have had heated arguments and regret not buying gold earlier. Now, they are doing everything possible to purchase more, even if it’s just a few hundredths of a tael each month.
“Seeing friends boast about profits of hundreds of millions from buying gold at low prices makes me so envious; I do not want to miss this opportunity,” he says.
To manage the fear of missing out but avoid risks by chasing peak gold, seasoned investors advise people to first clearly define their purpose for buying gold – long-term savings, risk hedging or short-term speculation – to avoid hasty or emotional decisions.
They should not obsessively track gold prices on social media or unofficial forums, which can heighten anxiety, they warn.
As for investment strategy, analyst Long advises against “putting all eggs in one basket” an instead recommends a balanced asset allocation with a portion in gold (5-10% of total assets) to hedge against inflation, maintaining savings deposits for safety and liquidity and considering other investment channels if knowledgeable.
He especially suggests tracking the government’s gold market policies to avoid buying based on crowd behavior and risks from policy shifts.
Even though gold prices have soared since last year, some investors have failed to make profits. Hoang Mai, 40, of Hanoi invested VND90 million in gold last year. “Soon after the price plummeted to just VND75 million, and our whole family could not eat or sleep.”
They waited for prices to recover to VND80 million and sold for a loss. Although gold prices have since far surpassed that level, the experience of losing money by chasing peak prices has led her to sit out the current gold rush.
“I would rather miss an opportunity than repeat the painful lesson from not understanding the market.”
