A new turning point for the gold market.

If the import of raw gold is opened up and SJC's monopoly is broken, the price difference between domestic and international gold could be reduced to only 1-2 million VND per tael.

After more than a decade of implementing a monopoly policy on gold bar production, the Vietnamese gold market is facing a crucial turning point. In a recent notable directive, General Secretary To Lam requested the removal of the state monopoly on gold bar branding – a move that experts believe will pave the way for a healthier, more transparent, and more competitive gold market.

More competition and transparency

During a meeting with the Central Committee's Policy and Strategy Department, the General Secretary emphasized that the state should continue to manage gold bar production, but does not necessarily need to maintain a monopoly. Instead, licenses could be granted to more qualified enterprises to participate in production, creating a fair competitive environment, thereby diversifying supply sources and contributing to market stability.

This directive is expected to address the persistent price disparity between domestic and international gold prices that has lasted for many years. In fact, at times, the price of SJC gold bars was 15-18 million VND/ounce higher than the converted international price, causing significant losses for people buying gold for hoarding. The root cause stems from the monopolistic model, namely the Saigon Jewelry Company (SJC), the only state-owned enterprise authorized to export gold bars according to Decree 24/2012. However, since 2014, the supply of SJC gold bars has failed to meet demand, while the State Bank of Vietnam has also refrained from importing raw gold for an extended period.

This has led to an increasing scarcity of gold supply, especially SJC gold bars. Even when the market is experiencing a "boom," such as in early 2024, with the State Bank of Vietnam injecting 14 tons of gold into the market through commercial banks and SJC, the supply remains severely lacking. This shows that a market tightly controlled by a monopoly is prone to supply-demand imbalances, which are incompatible with the requirements of a modern market economy.

Mr. Huynh Trung Khanh, senior advisor to the World Gold Council in Vietnam, believes that ending the monopoly and allowing capable businesses to produce gold bars is only one part of a necessary series of solutions. Equally important is licensing the import of raw gold to sustainably expand the supply. "Without raw gold, even allowing production is just a formality," he said.

Many people expect the price of SJC gold bars to narrow the gap with the world gold price. Photo: LAM GIANG

Similarly, Dr. Le Xuan Nghia, former Vice Chairman of the National Financial Supervision Committee, affirmed that the gold market is in an "abnormal" state, with supply almost non-existent, demand remaining high, and the price of gold bars pushed to an unreasonable level. According to him, if the import of raw gold were opened up and the monopoly of SJC were broken, the price difference between domestic and international gold could be brought down to a reasonable level, only 1-2 million VND/ounce, equivalent to about 2%, mainly due to taxes and fees.

Beyond simply ensuring supply, a healthy market also requires a modern and transparent trading system. Experts also expect the State Bank of Vietnam to soon amend Decree 24 towards more thorough reforms, rather than merely patching up immediate loopholes. A recent meeting of the Government Standing Committee also agreed on the view that Decree 24 should be amended through a streamlined process to quickly create a legal framework that aligns with reality and market development requirements.

From the perspective of businesses directly involved in the gold market, Ms. Han Thi Binh, owner of Kim Phat I private gold trading company (Ho Chi Minh City), said that the demand for investing in and accumulating gold bars and gold jewelry is currently very high. Therefore, the government needs to expand the market and create favorable conditions so that people can buy and sell gold more freely and easily.

Specifically, she proposed that the government should soon allow businesses to import and export gold to ensure a supply of raw materials for the production of gold bars and jewelry, meeting domestic consumption needs, while also taking advantage of export opportunities when market conditions are favorable. If businesses are allowed to export, they will earn profits in foreign currency, contributing significantly to the economy.

Open the market, collect taxes, increase imports.

According to experts, opening up the gold market does not mean loosening management. On the contrary, it requires strict control and systematization, especially through tax mechanisms and transparent trading platforms. According to economist Dr. Dinh The Hien, a clear tax mechanism for gold trading should be established soon. This is not only a tool for regulating the market but also a method for transparentizing capital flows.

"Currently, the domestic gold price differs significantly from the international price, but the state benefits nothing, while a large amount of foreign currency is withdrawn. If an import tax of 2-3 million VND/ounce is applied, the state will not only gain additional revenue but also help regulate the irrational hoarding of gold," Mr. Hien commented.

Along with tax policies, many believe that Vietnam needs to establish a national gold exchange, connected to international exchanges, thereby promoting gold investment through accounts – a popular form of investment in many developed countries.

Ms. Han Thi Binh proposed: "It is necessary to quickly establish a gold exchange connected with international gold exchanges to meet the demand for investment in intangible gold. This will not only help reduce the pressure of buying gold bars and gold rings, but also limit gold smuggling and prevent the 'outflow' of foreign currency. At the same time, gold shops nationwide should be allowed to buy and sell gold bars to create more favorable conditions for people in transactions," Ms. Binh suggested.

Mr. Tran Huu Dang, General Director of AJC Gold, Silver and Gemstone Joint Stock Company (Hanoi), expressed his wish that the State Bank of Vietnam would soon amend Decree 24 on gold trading activities in accordance with the directives of higher authorities.

He also suggested that the State Bank of Vietnam select a number of capable enterprises to undertake the role of importing and exporting gold and producing gold bars. According to him, this would promote healthy competition, helping to narrow the gap between domestic and international gold prices. This would allow people to flexibly choose when to buy or sell, helping to balance supply and demand and limit gold price surges like those that have occurred in the past.

"The State Bank of Vietnam should establish a gold exchange and connect with international gold exchanges, creating conditions for investors to trade gold through accounts. Accordingly, buyers will trade in USD and when selling, they will receive foreign currency, thereby contributing to balancing the supply and demand of USD in the market," Mr. Dang said.

No need to worry about a shortage of foreign currency.

Vietnam does not lack foreign currency to import raw gold. According to Mr. Shaokai Fan, Director of the Asia-Pacific region of the World Gold Council, in 2024 Vietnam will earn up to 65 billion USD from trade surplus, foreign investment, and remittances. Meanwhile, the estimated need to import raw gold is only about 20 tons, worth 1.7 billion USD, a figure that is entirely within its financial capacity.

Source: https://nld.com.vn/buoc-ngoat-moi-cho-thi-truong-vang-196250530215959867.htm