Gold loses its shine among Vietnamese people

Consumer demand for gold in Vietnam decreased by 9% year-on-year to 12.7 tonnes in the second quarter of this year, according to the World Gold Council.

The council’s (WGC) latest Gold Demand Trends report said the drop was due to a 5% year-on-year decrease in local bar and coin demand from 9.6 tonnes in Q2/2022 to 9.1 tonnes in Q2/2023, and an 18% year-on-year decrease in jewelry demand from 4.5 tonnes in Q2/2022 to 3.7 tonnes in Q2/2023.

The first quarter's gold consumption also fell by 12% from the same period in 2022. The total amount of gold bought by Vietnamese people in the first half of the year was 22.9 tonnes, down roughly 32% from the same period last year (33.6 tons), with two straight quarterly drops.

Domestic analysts claim that during difficult economic times, individuals worry more about their savings and spend their money on necessities rather than gold. Additionally, other investment avenues have started to demonstrate hints of success, such as improved securities.

The second quarter's business performance for organizations in the industry supported the pattern discovered by the WGC. Phu Nhuan Jewelry JSC (PNJ) recorded net sales of more than VND 6.66 trillion ($281 million), falling 17.4% from the same period last year. When compared to the same quarter last year, PNJ's second-quarter profit was down 8% at VND337.6 billion ($14.2 million).

A representative of a gold shop in Thiec market in District 11, a famous local gold market in Ho Chi Minh City, said that since the beginning of the year, the number of customers had decreased. Explaining this, the representative said that economic difficulties were the cause. People prefer buying essentials instead of gold.

Shaokai Fan, head of Asia-Pacific (excluding China) and global head of central banks at the WGC, said that similar to other ASEAN markets, consumer demand for gold in Vietnam declined this quarter. A continued slowdown in the Vietnamese economy for two consecutive quarters had impacted market sentiment and jewelry demand. Bar and coin demand was also hampered by liquidity restrictions due to the poor performance of equities and real estate.

Across the world, second-quarter central bank demand was down year-on-year to 103 tons, primarily driven by net sales in Turkey to meet strong local gold demand.

Louise Street, senior markets analyst at the WGC, commented that looking ahead to the second half of 2023, an economic contraction could provide an upside for gold, further reinforcing its safe-haven asset status. In this scenario, gold would be supported by demand from investors and central banks, helping to offset any weakness in jewelry and technology demand triggered by a squeeze on consumer spending.