Cambodians are used to uncertainty. In times of trouble in decades past, they often bought gold piece by piece and kept it hidden away.
The Sept 11 terrorist attacks in the US have created at least a short-term period of uncertainty. Now the price of local Canadia gold is jumping and the value of the riel against the dollar is decreasing.
The price of Canadia gold—with zero percent impurities—has jumped over $600 per kilogram over the past 10 days, according to Ly Huor Exchange Shop, which trades in gold.
The sharp increase, from $8,800 a kilogram to as high as $9,463, comes as the price of gold internationally has climbed, and Cambodians are looking to profit from possible future increases, analysts said Monday.
“It seems strange to me that people in Phnom Penh want to buy gold [this week] instead of keeping dollars,” said one Ly Huor executive, declining to be named. “This is because the rich people have heard about the gold [price] in the international market going up. So they buy now to sell it in the future.”
Before the attacks on the US, most people were putting their faith in the dollar, gold vendors reported. They still were not using Cambodian banks—trust in them is still low—but they were storing dollars.
Now, with the price of the dollar weakening against other currencies, people are going for gold again.
“During periods of uncertainty, people buy the gold, not only in Cambodia, but in the rest of the world,” said Sok Hach, a macro-economic analyst at the Cambodian Development Resource Institute.
He said his institute will likely begin a small survey around local markets “to evaluate the psychological impact” of the attacks.
While an increase in the price of gold was expected, Sok Hach said, the recent devaluation of the riel against the dollar was puzzling.
The riel has stabilized considerably since the 1998 elections. But since the attack its value compared to the dollar has moved from 3,925 to 3,980.
“It is surprising for me that the riel is devaluating towards the dollar,” Sok Hach said. “Normally [at this time of year], it should appreciate against the dollar.”
People traveling to the provinces for the Pchum Ben festival—which ended just last week—need more riel for travel, parties and offerings. That has a tendency every year to strengthen the riel against the dollar, Sok Hach said, adding that he needed time to analyze the reasons for the current dip in value.
Vendors in the markets are closely watching both the price of gold and the value of the riel. While they reported no increase in the price of local market goods so far, several interviewed Sunday said the prices might increase if the riel’s value didn’t stabilize.
“I think that whatever goods people can produce here will increase in price,” said Sok Hong Ly, a Phsar Thmei vendor.