VietNamNet Bridge – Whether the domestic gold price decreases to come closer
to the world price depends on the amount of gold the State Bank would put into
circulation and the people’s confidence on the bank’s policies.
Right after the watchdog agency stated it would organize bullion gold tenders,
the gold price has fallen down significantly, thus helping narrow the domestic
and the world price from VND5 million per tael to VND2.8 million.
However, it seems that the domestic price decreased not because of the new
policy. In fact, the gold price has been on the decrease, now staying at the
6-month deepest low. And though the gap has been narrowed, the domestic price is
still sky high.
Governor of the State Bank Nguyen Van Binh once said that the price gap of
VND400,000 per tael would be the ideal scenario. As such, the current gap of
VND3 million per tael means that Vietnamese have been overcharged.
Le Hung Dung, President of SJC, admitted that the domestic price has been much
higher than the world price because there has been no new supply source over the
Dung also said that despite the big price gap, gold companies did not make fat
profits as people thought, because there have been very few transactions.
The State Bank of Vietnam has affirmed on local newspapers that the gold
reserves are big enough to intervene in the market when necessary. However,
worries still exist that if the State Bank is capable enough to stabilize the
market for a long term.
“Suppose that the gold price keeps decreasing, and people would buy gold instead
of bargaining away. Will commercial banks and gold companies have enough gold to
sell to people, then?” questioned Tran Thanh Hai, General Director of the
Vietnam Gold Trade and Investment JSC.
Hai has every reason to raise the question. On February 28, when the price gap
felt to VND2.8 million, people rushed to buy gold, leading to the gold price
In the past, the State Bank once set up G5+1 group, in charge of selling gold to
intervene in the market. However, the group failed to fulfill the task because
of the overly high demand and the limited supply.
In principle, nowadays, when the State Bank holds the monopoly in the bullion
gold market, it can have bigger power to intervene in the market. However, this
does not mean that the State Bank would be able to import gold as much as it
wants, because the gold imports would affect the macro economy, foreign currency
reserves, and the dong/dollar exchange rate.
Meanwhile, the gold demand is still high, because they feel the uncertainties of
the national economy and they tend to keep gold instead of cash.
Experts believe that in the immediate time, the drastic measures taken by the
State Bank would help force the domestic price down and come closer to the world
price. However, no one can say for sure if the State Bank is capable enough to
keep the market stable for a long time.
They have also pointed out that if the State Bank still strains every nerve to
intervene in the market; this would have negative on the macro economy and
result in the returning of the “goldenization.”
Dr. Nguyen Minh Phong, a well-known economist has suggested setting up a
national gold trading floor to make the domestic gold price “communicative” with
the world price.
Compiled by C. V