Many countries across the world are hit by the economy crisis. European countries, US and India are among the few countries who are currently struggling their way through combating the lethal crisis.
India for example, has increased the import duty of the precious metal to 4% in order to control its citizens from buying and investing in gold. Hence, this resulted in a 21 days boycott against the new policy among the goldsmiths in India. They demand for a reduction of import tax from 4% to 3%.
In addition, European countries are also in the verge of encountering an economy crisis. Expert stated that Spain will be the following country to be affected by the economy crisis as its government’s debt increases almost 6% every year. According to the New York Times, a number of economists and analysts predicted that Spain might soon need to bail out its banking system, which could force it to seek European aid that might end up far larger than the bailouts of Greece, Portugal and Ireland. Therefore, Spanish savers and investors are expected to turn to gold investment to counter the crisis.
As what John Dizard of Financial Times has pointed out back in 2007, “Years of low return on risk capital are in line with years of return on gold”. Not only that, Bullionvault, a gold news website also highlighted that gold may possibly reduce the risk of worldwide investors’ portfolio as it possesses a very low correlation and even negative correlation on risky assets.
Due to the economy downturn, more and more governments are imposing tighter gold investment policies. This is depicted from the recent announcement made by the Vietnamese government. According to the policy, they will assert a monopoly over the production of gold bars as well as import and export of gold. Pertaining that, they will hold the right of its citizens’ gold trading with the aim of reducing the number of gold investors and easing the tension of Vietnam currency.
With the limitation of gold trading, Vietnam government hopes it will be able to release the tension of currency rate by causing people to sell currency and keep gold, while minimizing the influence of the gold market on monetary policy. The policy is expected to take effect from 25 May onwards.
Based on the news reported, the Vietnamese government is encouraging people to keep 300 to 500 tonnes of gold in the bank rather than trading it with the hope it could stabilize the country’s economy using gold as the medium. From that, we can see the beneficial of keeping gold in which it could strengthen and enhance a country’s currency rate.
According to Dato’ Louis Ng, Executive Chairman of Public Gold Group, “Malaysia investors should take Vietnam’s issue as a lesson and start keeping physical gold and silver to prevent depreciation of the country’s currency rate which will eventually affect their wealth.”