Expert: Gold price drops sharply due to 2 factors; may drop another 10 million VND

Over the past two weeks, gold prices have experienced significant fluctuations. At one point, SJC gold bars were listed by gold dealers at prices reaching 80 million VND per tael.

However, on December 28th, the Prime Minister issued urgent directives regarding gold, and the State Bank of Vietnam also stated its readiness to intervene to stabilize the market. By the morning of December 29th, the price of SJC gold bars continued to fall. The selling price had dropped to 74 million VND/ounce, a decrease of approximately 6.5 million VND compared to its peak.

By noon on December 30th, the price had even dropped to 72.5 million VND/ounce for selling, while the buying price fell to 69.5 million VND, a decrease of nearly 8 million VND compared to the peak set on December 26th.

Two factors caused the sharp drop in gold prices.

Speaking to a reporter from Dan Tri newspaper , Associate Professor Dr. Nguyen Huu Huan, a lecturer at the Ho Chi Minh City University of Economics , commented that the Prime Minister's request for the State Bank of Vietnam to stabilize the gold market will immediately impact the psychology of gold investors in recent times.

Accordingly, investors are waiting for gold prices to continue rising, and after receiving instructions from the Prime Minister, they will sell to "take profits" because they believe gold prices will fall sharply when the State Bank of Vietnam intervenes in the market.

In addition, many investors are also selling to "lock in profits" after holding gold for many years. Four years ago, the price of SJC gold bars was listed by businesses around 40-42 million VND/ounce.

Despite the volatile prices, many people still came to trade gold on the afternoon of December 28 (Photo: Manh Quan).

Sharing the same view, expert Phan Dung Khanh said that the sharp drop in gold prices could stem from two factors. Firstly, the psychology of gold holders is affected by the Prime Minister's directive. Secondly, it comes from the psychology of profit-taking when gold prices are high and the fear of a sharp drop.

Following the Prime Minister's directive and the State Bank's actions, the gold market will become more stable, and the price difference between domestic and international gold will narrow.

Mr. Khanh believes that the price of SJC gold fluctuates without any specific pattern, generally following the movements of world gold prices. SJC is the national gold brand; when the gold market goes down, the price of SJC gold also goes down, but the difference is small, and vice versa.

What will happen to gold prices if the State Bank intervenes to stabilize them?

According to Mr. Huan, many years ago, the State Bank of Vietnam also intervened to stabilize the gold market. Gold prices remained stable for many years without significant fluctuations. However, in recent years, the monetary authority has not intervened in the gold market, allowing it to operate on its own.

If the monetary authority intervenes in the gold market as directed by the Prime Minister, it is highly likely that the price of gold will fall in the near future, and is unlikely to rise further.

The difference between domestic and international gold prices may narrow to around 3-4 million VND (Photo: Manh Quan).

The trend for domestic gold prices can only be a decrease to near world gold prices. This will affect investor sentiment, causing them to sell their gold before prices fall sharply.

"If it's solely due to psychological factors, the price of gold will only fall by a few million dong. But if there is intervention to stabilize the gold market, preventing a large price difference between domestic and international gold, the difference could decrease to around 3-4 million dong, meaning the price of gold could fall by about 10 million dong per ounce," Mr. Huan predicted.

"The monopoly on gold bars should be stopped."

Mr. Nguyen Huu Huan commented that domestic gold prices are not linked to international prices, operating as a "monopoly" for many years, leading to extremely unexpected and unpredictable fluctuations.

He argued that there was a phenomenon of gold price manipulation. Specifically, domestic gold prices sometimes moved in sync with world prices, rising, but when international prices fell, domestic prices fell slowly or not at all.

"Notably, this only applies to SJC gold bars; other types of gold such as rings and jewelry remain unchanged," the expert commented.

SJC gold bars have held a monopoly in the market for many years, leading to price controls (Photo: Thanh Dong).

He stated that SJC gold bars have been monopolized for over a decade. For more than 10 years, the market hasn't seen any additional SJC gold bars. Therefore, the entities holding the majority of gold on the market can control the price. As for gold rings, the supply is abundant due to more suppliers, so the price fluctuates more according to world prices and is more competitive.

To stabilize gold prices, Mr. Huan believes that the only way to intervene in the market at this time is to end the monopoly on gold bars. The state should only control the supply, while production can be left to other businesses to participate, using gold from the public to produce gold bars, contributing to stabilizing the market's demand for gold bars.

Although market competition benefits consumers, import restrictions should still be maintained to ensure monetary security and reduce speculation and hoarding.

According to the expert, the balance of payments has been quite stable in recent years, and importing gold would result in a significant loss of foreign currency, while the trade surplus and foreign exchange reserves are not yet high.

Source: https://dantri.com.vn/kinh-doanh/chuyen-gia-gia-vang-giam-sau-do-2-yeu-to-co-the-giam-them-10-trieu-dong-20231229145858723.htm