phuocpham
31-03-2009, 09:44 AM
First installment: The ups and downs of betting on gold
Holding paper gold when you’re leveraged to the hilt
can be a nerve-wracking experience. Just ask any futures gambler at
Vietnam’s gold exchanges.
Unlike the stock market, the officially banned gold
futures market fluctuates second by second, delivering windfall profits
or wiping out entire investments in next to no time.
A contract buyer only needs to fork out seven percent
of the money as a bank guarantees the rest. Of course, if he wants to
take delivery of the actual metal then the bank must first be paid in
full.
“Two years ago, when the stock market turned bearish,
I cashed out for VND5 billion (US$280,324) and put the money into gold,
as the returns can be attractive,” said Quang, a keen punter at the VGB
gold exchange in Ho Chi Minh City.
“Here you can buy a contract for 700 gold taels for
VND1 billion ($56,064) whereas it would cost VND13.6 billion ($762,481)
to purchase the actual metal from a gold shop at today’s rate,” he said
(a tael equals a bit over 1.2 troy oz.).
“I traded big in the first few days. Once, in just one
day, I made VND480 million from trading 600 taels. Then another day
came along when I was pretty panicky after losing VND1 billion from
trading 3,000 taels,” Quang recalled.
Nam is another enthusiastic punter who spends most of his time at VGB.
He bought 50 taels at VND19.452 million a tael on
March 17 in the hope that gold’s next move would be up. Ten minutes
later, he had a profit of VND1.05 million when the price increased to
VND19.473 million.
Nam then bought another 50 taels at VND19.473 million
a tael but lost VND650,000 in the next 20 minutes as gold fell to
VND19.461 million.
Thanh Nien even heard of a trader who had made VND20 billion in January but had gone on to lose VND30 billion in February.
As is obvious from the margin rate, it only takes a
swing of one percent in the price of gold to generate a profit or loss
of 14 percent or thereabouts, so a swing of seven percent will either
double or obliterate an initial cash outlay.
When they’re betting on gold, traders need to keep a
close eye on the international spot price as the domestic price tracks
it closely.
They must also stay abreast of global news that might
affect the gold price, even if that means hiring an interpreter, as
quite a few of them do.
Holding paper gold when you’re leveraged to the hilt
can be a nerve-wracking experience. Just ask any futures gambler at
Vietnam’s gold exchanges.
Unlike the stock market, the officially banned gold
futures market fluctuates second by second, delivering windfall profits
or wiping out entire investments in next to no time.
A contract buyer only needs to fork out seven percent
of the money as a bank guarantees the rest. Of course, if he wants to
take delivery of the actual metal then the bank must first be paid in
full.
“Two years ago, when the stock market turned bearish,
I cashed out for VND5 billion (US$280,324) and put the money into gold,
as the returns can be attractive,” said Quang, a keen punter at the VGB
gold exchange in Ho Chi Minh City.
“Here you can buy a contract for 700 gold taels for
VND1 billion ($56,064) whereas it would cost VND13.6 billion ($762,481)
to purchase the actual metal from a gold shop at today’s rate,” he said
(a tael equals a bit over 1.2 troy oz.).
“I traded big in the first few days. Once, in just one
day, I made VND480 million from trading 600 taels. Then another day
came along when I was pretty panicky after losing VND1 billion from
trading 3,000 taels,” Quang recalled.
Nam is another enthusiastic punter who spends most of his time at VGB.
He bought 50 taels at VND19.452 million a tael on
March 17 in the hope that gold’s next move would be up. Ten minutes
later, he had a profit of VND1.05 million when the price increased to
VND19.473 million.
Nam then bought another 50 taels at VND19.473 million
a tael but lost VND650,000 in the next 20 minutes as gold fell to
VND19.461 million.
Thanh Nien even heard of a trader who had made VND20 billion in January but had gone on to lose VND30 billion in February.
As is obvious from the margin rate, it only takes a
swing of one percent in the price of gold to generate a profit or loss
of 14 percent or thereabouts, so a swing of seven percent will either
double or obliterate an initial cash outlay.
When they’re betting on gold, traders need to keep a
close eye on the international spot price as the domestic price tracks
it closely.
They must also stay abreast of global news that might
affect the gold price, even if that means hiring an interpreter, as
quite a few of them do.