Customers at a gold store
Ms. Hong Thuy in Ho Chi Minh City’s Binh Thanh District said that she bought 30 taels of gold in 2020 for about VND43 million a tael, now the price of gold has nearly doubled, but she still does not sell. Not only Thuy but most Vietnamese people consider gold as an asset to save and hoard. Although there is no official number, according to some statistics, the amount of gold stored by people is estimated at 500 tons.
Vietnamese people’s appetite for gold has been accompanied by changing price of SJC gold over the past time, much higher than the world gold price. Since the beginning of the year, the world gold price has increased from US$1,830 an ounce (equivalent to about VND50.2 million a tael to $1,985 an ounce (or 55.2 million a tael, an increase of about VND5 million a tael, the domestic price of SJC gold increased from VND61 million a tael to VND73 million a tael (on March 8), up to VND12 million a tael.
In the past two weeks, the domestic SJC gold price fluctuated strongly and continuously set new peaks, but it has been sometimes contrary to the world gold price. When the world gold price fell, the domestic gold price still increased. The difference between domestic and international SJC gold prices in the week was up to nearly VND20 million a tael, about 30 percent higher than the world gold price.
A gold expert Nguyen Ngoc Trong assessed that recently, the SJC gold price has increased to a record because large gold trading enterprises have adjusted the domestic SJC gold price to increase too much compared to the world gold price, even when there has been little trading.
The current price of SJC gold does not necessarily reflect market supply and demand, but because gold trading enterprises wanted to create prices in the context that the world gold price is trending up.
Moreover, to prevent risks, gold businesses also widened the buying and selling gap of VND2.2-VND2.5 million a tael, pushing risks for buyers.
According to experts, the difference in domestic and international gold prices is too high, which can affect the domestic exchange rate. If this difference is maintained for a long time, gold smuggling is unavoidable.
Vice Chairman of the Vietnam Gold Traders Association Huynh Trung Khanh analyzed that the current gold price is adjusted by the war between Russia and Ukraine. However, they warned investors to be careful because the domestic SJC gold price continuously went up and down several times even in just one day the SJC gold price was adjusted up and down to VND3- VND3. 4 million a tael.
Dr. Dinh The Hien, an economist, said that gold is now considered a speculative asset because the war is happening. The prices of gold and oil heavily depend on the war; as a result, the unpredictable price of precious metal prices can continue to go up but can also plunge at any time. For example, when there is positive information about the negotiations between the two sides, the price of gold and oil will immediately cool down. Therefore, it is difficult to accurately forecast the gold price; investment in gold during times of high volatility is very risky.
Previously, the State Bank of Vietnam had allowed commercial banks to mobilize and lend capital in gold, which revealed many shortcomings leading to the ‘goldenization’ of the economy, causing difficulties for management. Banks and individuals suffer big losses due to gold trading and gold speculation led to many exchange rate fluctuations. Additionally, the domestic gold market experienced many ‘unreal fevers’ when the world gold price increased…
The Government's Decree 24/2012 on the management of gold business activities, with the regulation that the State Bank of Vietnam monopolizes the production of SJC gold bars, and exports and imports raw gold to produce gold bars, has extinguished the gold rush, stabilizing the exchange rate during the past time.
Presently, the State Bank is still consistent with this policy. Gold mobilization and lending activities of banks have ended, now the bank only holds gold for a fee.
The Vietnam Gold Business Association said that over the years the association has made many recommendations such as abolishing regulations on the State Bank's monopoly on gold bar production. Furthermore, some qualified businesses should be licensed to produce gold bars.
In addition, the National Gold Exchange should be established in order to create a connection between the domestic gold price and the international gold price. Plus, more gold bars should be made to supply to the market to balance supply and demand, avoiding the phenomenon of gold price fever when the international gold price rises sharply again.
At the same time, the Vietnam Gold Trade Association proposed the State Bank consider granting a license to import raw gold for businesses to produce gold jewelry.
