Central bank targets ongoing price control of gold market
Thu June 13 2024
With this reference price, the four banks - Vietcombank, VietinBank, BIDV, and Agribank - and Saigon Jewellery Co., Ltd. (SJC) offered a direct selling price that was around $40 more than the SBV announcement, and $80 more than the set price from two days previous.
“Apparently, people rushed into buying gold in the previous days and even yesterday, and have counted losses. The losses might even be bigger if people continue to rush on the gold market for speculation purposes,” said economist Le Xuan Nghia.
He explained that by market rules, for the gold price to go down, the quantity needs to be sufficient, and gradually increase, and the SBV has the total capacity to do this.
Statistics from the World Gold Council show that the volume of gold imports to meet domestic demand in Vietnam is just about 20-30 tonnes per year, equivalent to about $2.5-3 billion. This is deemed a low volume compared to the country’s current import turnover value approximating $200 billion, as well as the SBV’s foreign exchange reserves reaching $100 billion.
“In the long term, the SBV needs to hand back gold trading to jewellery businesses which are now in the restructuring process to boost market transparency, reduce speculation, and use tax tools to control the bullion market,” Nghia added.
On behalf of the SBV, Dao Xuan Tuan, director general of the Foreign Exchange Management Department, noted that the move to sell SJC gold bars directly to four state commercial banks SJC is to control and narrow the difference in the gold price between domestic and international market at an appropriate level.
“The efforts to narrow the gap would likely lead to further decreases in the selling gold prices in the forthcoming time. People, therefore, need to be very cautious when buying gold amid current volatile world gold prices,” said Tuan.
In recent times, the SBV has held a handful of auctions, supplying the market with 48,500 taels of SJC-brand gold bars, equivalent to more than 1.8 tonnes of gold.
The difference between the domestic price of SJC gold bars and the world price, however, still fetched high at about 20 per cent. According to experts, this illustrates that besides supply and demand factors, there might exist illegal acts such as price manipulation and speculation, causing instability in the market.
“The goal of the fresh measure is to shortly narrow the gap between domestic and international gold prices to a suitable and sustainable level,” said SBV Deputy Governor Pham Quang Dung.
“Along with this, we are joining efforts with relevant management agencies and the state inspectorate to inspect the law obedience in performing gold business of credit institutions and businesses. Serious punishments shall be applied to any violations,” he said.
Source: https://vir.com.vn