Gold auctions are only a temporary solution.

According to plans, the State Bank of Vietnam (SBV) will hold a gold auction to increase supply to the market, aiming to reduce the price difference between domestic and international gold bars. However, Dr. Dinh The Hien, Director of the Institute for Applied Informatics and Economics Research, believes this is only a temporary solution.

Dr. Dinh The Hien, Director of the Institute for Applied Informatics and Economics Research

Since the issuance of Decree 24/2012/ND-CP (Decree 24), the Vietnamese gold market has been a monopoly, with prices sometimes as high as 20 million VND/ounce higher than world prices. Today, the State Bank of Vietnam is holding a gold auction to increase supply to the market. In your opinion, will this solution reduce the difference between domestic and international gold prices?

Gold auctions are merely a temporary solution to increase market supply. Naturally, the winning bid price will be lower than the current market price, but I believe it won't be significantly lower because only the highest bidder will win. Therefore, gold auctions are only a temporary solution to quickly supplement gold supply to the market, not a fundamental solution to address the unreasonable gold price discrepancies as directed by the Prime Minister .

The question is, why didn't this situation occur in the gold market before 2012 (before Decree 24 was issued), but after Decree 24 came into effect, it became increasingly serious? The reason is that before 2012, a certain amount of gold was regularly supplied to the market each year, so the price difference between domestic and international gold was only 1-2 million VND/ounce. Since Decree 24 came into effect, the market has received no new supply, while demand increases every year. Increased demand coupled with a lack of supply has led to an increasingly unreasonable price difference.

So, what is the fundamental solution to narrow the gap in gold prices, sir?

Investing in and hoarding gold is a legitimate need of the people. I believe that a comprehensive study is needed to calculate the annual demand for gold among the population. To do this, we must calculate the annual added value of Vietnam and, based on that added value, how much can be accumulated in foreign currency or gold. From there, we can determine the reasonable amount of gold to import into Vietnam.

This also serves as the basis for the State Bank of Vietnam to grant quotas to businesses importing gold in order to increase supply. By regularly supplementing the supply in this way, the supply-demand imbalance and the gold price difference will gradually decrease.

People are increasing their gold holdings, and the State Bank of Vietnam is increasing the supply of gold to the market. Could this lead to the risk of gold hoarding in the economy, as some people fear?

Gold hoarding only happened 30 years ago; nowadays, gold hoarding has no basis. When people buy houses, land, cars, etc., does anyone calculate the price in gold?

As for the demand for gold as a store of value among the people, in my opinion, it's perfectly normal and nothing to worry about. A country can accumulate assets from value appreciation, whether it's in land, bank deposits, gold, or foreign currency... Our country has already allowed its citizens to hold gold, foreign currency, and land.

In fact, I believe that, from an economic perspective, accumulating gold is better than accumulating land. The reason is that accumulated land often does not create added value for the nation. Rising land prices can even be dangerous for the economy (increased land prices lead to higher land lease prices, making it difficult for industrial zones to attract foreign investors...). Meanwhile, gold is highly liquid and can be converted into foreign currency at any time.

While accumulating wealth is a legitimate need for the people, if people keep investing their money in gold or land without putting it into production or business, the economy will also suffer.

We see that the difference between domestic and international gold prices (converted to Vietnamese currency) has reached its highest level in the past three years (currently over $400/ounce), precisely because of the real estate market downturn, which led people to chase after gold. Increased demand without increased supply leads to a large price difference.

If we are determined to prevent the outflow of foreign currency at this time, we will revert to a planned, voluntarist economy, which will ultimately fail to stabilize the gold market. Without a "controlled linkage" with the global gold market, the domestic gold market will become distorted.

To prevent people from chasing after gold, the most important thing is to maintain the value of the domestic currency. If people worry about the devaluation of the dong, they will rush into land and gold. If people see that the dong is secure and inflation is low, they will gradually deposit their money in banks. In other words, if the government does a good job of ensuring the value of the dong, the flow of money into gold and land will gradually decrease, and gold will no longer be as dominant.

I am very pleased that in recent years, the Government has maintained macroeconomic stability, controlled inflation, kept the Vietnamese dong stable, real estate prices have decreased, and gold prices will gradually stabilize if we allow imports to facilitate trade.

Exchange rates are heating up amidst an increasingly complex global situation, and the US Federal Reserve (Fed) is not lowering interest rates as soon as expected. If gold imports are allowed, will the exchange rate be affected, sir?

With the current gold price difference, who can claim there isn't gold smuggling? If gold is smuggled, would they really use Vietnamese currency? The higher the price difference, the stronger the smuggling, and USD will continue to flow into the black market. Therefore, if the gold price difference isn't brought down to a reasonable level, not only will the gold market be chaotic, but USD will continue to be drained.

Currently, besides imports, we need to mobilize foreign currency to repay national debt and meet the needs of the people (studying abroad, overseas tourism, etc.). Looking solely at the trade balance is insufficient; to have abundant foreign currency, we need to accelerate the disbursement of FDI capital. In 2024, FDI disbursement did not decrease, but it did not increase as expected. We need to do even better in this area to ensure a sufficient supply of foreign currency and protect the exchange rate.

However, I believe that the exchange rate from now until the end of the year is not too worrying.

Source: https://baodautu.vn/dau-thau-vang-chi-la-giai-phap-tinh-the-d213189.html