“If you don’t have much money in your life and everything you buy and sell is ultimately priced in US dollars and your local currency is depreciating, it doesn’t feel good. Inflation has a negative effect and further depreciates the currency. It’s a double whammy.”
Langford, executive director of business consultancy AirGuide International, said demand for gold in Southeast Asia had driven prices up over the past six to 12 months.
Gold prices have soared to new heights this year, hitting an all-time high of $2,450 an ounce in May.
In China too, investors are turning to gold as a safe haven as confidence in the property and stock markets is fading.
Economic turmoil, geopolitical uncertainty and fears of currency devaluation are prompting a flight to gold, a traditional safe haven asset.
A falling currency hits small investors hardest, eroding their savings and raising their costs.
And it’s not just retail investors seeking a safe haven: central banks are also buying gold at a “rapid pace,” according to the World Gold Association.
More than 80% of central banks expect their reserve managers to increase their gold holdings over the next 12 months, according to a survey released by the council on June 18, as they stockpile the precious metal as a bulwark against rising geopolitical risks and macroeconomic uncertainty.
![A seller of household electrical appliances uses a mobile phone as she waits for customers at a shop in Hanoi. Economic uncertainties are mounting. Photo: AFP](https://i0.wp.com/cdn.i-scmp.com/sites/default/files/d8/images/canvas/2024/06/30/fcece207-5f5a-45b3-88a9-7aaa3109d522_e89ae600.jpg?w=749&ssl=1)
“Extraordinary market pressures, unprecedented economic uncertainty and ongoing political turmoil around the world have made gold a top priority for central banks,” said Xiaocai Fan, the council’s head of central banking and Asia-Pacific.
“Notably, many reserve managers remain enthusiastic about gold despite record demand from the official sector and rising gold prices over the past two years.”
Higher U.S. interest rates typically send gold prices lower, but gold’s continued strength suggests investors are more concerned about stagnant global inflation, economic uncertainty and geopolitical tensions than rising interest rates, Xu Le, a strategy and policy lecturer at the National University of Singapore Business School, wrote in a May analysis.
According to the World Gold Association, investors in Asian markets are bucking the typical pattern of buying gold only when prices are falling, choosing to buy the precious metal even when prices are rising.
![Gold has “captivated the public”, a Vietnamese Communist Party newspaper reported in June. Photo: dpa](https://i0.wp.com/cdn.i-scmp.com/sites/default/files/d8/images/canvas/2024/06/30/0b6c5b07-fd13-44ca-bc97-ebf7434cb36c_ac40b374.jpg?w=749&ssl=1)
“Compete for purchase”
Gold buyers flocked to Vietnam’s state-run banks in June after the central bank agreed to increase gold sales to meet public demand and bring down prices, local reports said.
Banks’ stocks were quickly depleted, forcing them to limit purchases to one tael per customer. Queues continued for weeks until banks introduced an online registration system for gold buyers, but that system also filled up within minutes each day.
Gold bars now a major investment channel in Vietnam
The selling has temporarily calmed gold prices, but they remain elevated as buyers remain concerned about a sharp drop in savings rates, a sluggish property market and the continued devaluation of the dong, Huynh Trung Canh, vice chairman of the Vietnam Gold Traders Association, said at the Asia-Pacific Precious Metals Conference in Singapore in June.
“Gold bars have now become Vietnam’s main investment channel,” he said. “People are queuing up rain or shine to buy gold bars. Commercial banks have sold two tonnes of gold in a week, compared to two tonnes in a month before.”
Vietnam’s currency, the dong, has fallen about 10% against the U.S. dollar since the end of the pandemic in 2022, continuing a downward trend, according to foreign exchange data.
Meanwhile, Vietnam’s inflation rate reached 4.44% in May, the highest level since early 2023.
Retail investors are also flocking to gold in Thailand. Nuttapong Hirunyasiri, managing director of MTS Gold Group, told the Asia-Pacific Precious Metals Conference that this is the first time in his career he has seen Thais buying gold at a time when prices are rising.
![Thais queue to buy gold at a jewellery shop in Bangkok. Thai investors turn to gold when the local stock market is soft. Photo: AFP](https://i0.wp.com/cdn.i-scmp.com/sites/default/files/d8/images/canvas/2024/06/30/4b2de7f7-2e16-4050-8709-ba977721aac8_a4d68572.jpg?w=749&ssl=1)
“They should be selling at this price, but everyone is buying. People are actually fighting to buy,” he said.
“Local consumers are very smart and as soon as they hear any news, they rush to the gold stores.”
He explained that this was because Thai investors were turning to gold as it offered an alternative safe haven as the country’s stock market remained weak.
Like the Vietnamese dong, the Thai baht has also fallen about 10% against the U.S. dollar since 2022. Inflation hit 1.54% in May, the highest since April last year, according to foreign exchange and market data.