- The Washington Times - Saturday, June 1, 2002

The money-counting machine at the crowded Bao Tin gold shop in a quiet back street of Hanoi seems to endlessly churn through bills. Staff snatch time between sales to log onto the Internet, checking prices in London and Hong Kong.

"Every time I save enough money, I buy some gold. It doesn't matter to me what the price is, because it's for savings," says Tran Tri Loan, a vegetable and flower farmer.

The business of gold is booming in Vietnam and almost everywhere these days.

Terrorism fears, Middle East tensions, renewed hostilities between India and Pakistan, Japan's wobbly economy have contributed to the recent surge in the price of gold to its highest level in more than 2½ years.

The price of gold has surged more than 15 percent since the year began and is at a level not seen since October 1999, when it hit $333 in intraday trading, according to the London-based World Gold Council. Gold traded at $327.55 an ounce yesterday in Hong Kong, up $2.80 from Thursday.

Added to the speculative pressures driving the flight into gold is the age-old appetite for the precious metal among Asians, who traditionally have used it as a hedge against uncertainty.

Worldwide, purchases of gold investment products surged 36 percent in the first quarter of the year, the World Gold Council reported. The trend was helped by the strong buying in Vietnam and Japan, as well as China, Pakistan and Turkey.

"We heard stories where we had Japanese persons going to their bank and saying, 'Cash me out. I want three gold bars,'" said Amaury Conti, a gold equity trader with U.S. Global Investors Inc. in San Antonio.

Vietnamese hoard gold, hoping to save enough to buy homes priced in gold taels equivalent to 1.32 ounces. Mainland Chinese tourists flood into glittery Hong Kong gold shops to pick up chunky gold necklaces and bracelets symbols of new affluence.

Japanese have been shifting a share of their massive nest eggs into gold, wary of new government limits on deposit insurance and desperate for investments that might pay more than the 0.1 percent interest rates troubled banks pay.

Japanese demand soared to 56.5 tons in the first quarter of this year, more than double the 22.1 tons bought in the same period a year ago and more than half the 109.3 tons bought by Japanese in all of 2001, said the World Gold Council, an association of gold producers.

Traders say Japanese buying began to taper off in February.

The gradual weakening of the U.S. dollar was already exerting upward pressure on gold, whose price tends to be inversely related to the strength of U.S. currency. Stock market volatility has reinforced that trend.

"It's mainly the instability in world equity markets and the slide of the U.S. dollar," said Peter Tse, a dealer at gold trading and finance firm Scotia Mocatta in Hong Kong. "Investment funds are going into the bullion market. Since it's a relatively small market, a small amount can have a huge effect."

Heavy selling by central banks that no longer felt compelled to keep large gold stockpiles as backing for their currencies and economies pushed the gold price to a 20-year low of $259.20 an ounce in mid-1999. An agreement among major central banks in September 1999 to keep sales at an orderly rate of about 400 metric tons a year for five years has since reduced selling pressure, Mr. Tse said.

Despite the surge in price caused by investments in what is known as "paper gold," the global economic slump caused worldwide demand for physical gold, such as jewelry, coins and taels, to fall to 749.5 tons in the first quarter of this year, compared with 830.5 tons a year earlier, the World Gold Council reported.

Hong Kong Chinese, feeling much poorer than they did before the Asian financial crisis punctured property and stock price bubbles in 1997, have been shunning the lavish offerings of the city's countless gold shops solid gold Hello Kitty figures, diamond-encrusted gilded model cars and traditional astrological figures.

These days, Mr. Conti said, "people actually will hold gold as an asset, not so much as a piece of jewelry on their finger."

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