When supply is abundant, the gold market will be more stable.

Dr. Nguyen Tri Hieu, economic expert.

The State Bank is submitting to the Government a draft amendment to Decree 24/2012/ND-CP on the management of gold trading activities (Decree 24) in the direction of removing the monopoly on gold bar production and gold import, opening a mechanism for banks and enterprises to import gold bars. In your opinion, how will these regulations affect the domestic gold market?

I support the abolition of the monopoly on gold bar production as well as the import of raw gold. Allowing businesses to import gold is absolutely correct.

Currently, the market organization has been tightly ensured, the capacity of the supervisory agencies has increased, and the macroeconomic conditions are also favorable, so I think it is appropriate for the State Bank to step back, take the role of the highest management agency, and not directly participate in the gold market.

Regarding the gold import limit, what is appropriate, sir?

The State Bank will base the gold import limit on many factors, including the country's foreign exchange reserves and domestic exchange rate fluctuations. Certainly, gold imports will have a significant impact on the domestic exchange rate.

Currently, Vietnam's foreign exchange reserves are only about 80 billion USD, equivalent to approximately 3 months of average imports. Meanwhile, according to the recommendation of the International Monetary Fund (IMF), foreign exchange reserves of countries must reach at least 3 months of average imports or more. If gold imports are large, foreign exchange reserves will be depleted.

The State Bank certainly carefully calculates imports based on many factors, including foreign exchange reserves and exchange rates. Notably, since the beginning of the year, although the USD Index has fallen sharply, the VND has continued to depreciate by about 2.8% against the USD. This shows that the domestic exchange rate is still under great pressure.

However, the reason for banning gold imports is not because of concerns about exchange rates. Monetary policy cannot satisfy all economic goals and the role of the State Bank is to find a balance. I believe that if a suitable balance point is found, the State Bank can still import gold, stabilize the gold market, without causing instability to the foreign exchange market and exchange rates.

In your opinion, is it reasonable to allow commercial banks to participate in the production of gold bars?

I don't think so. Commercial banks can participate in importing gold, distributing gold, storing gold for customers. However, if commercial banks participate in gold production, it is not in accordance with the traditional function of banks.

In the world , commercial banks only participate in distributing or providing gold custody services, but do not directly participate in the production of gold bars.

The draft amendment to Decree 24 does not mention the establishment of a gold exchange, but the State Bank said it is studying this model. In your opinion, if established, what model should a gold exchange in Vietnam follow?

If a gold exchange is established, Vietnam should only establish a commodity exchange and can refer to the model of the Chicago Mercantile Exchange (COMEX).

The establishment of a commodity gold exchange will make transactions more transparent, bringing domestic and international gold prices closer together, even updating every minute and every second. The establishment of an account gold trading floor in Vietnam, in my opinion, is inappropriate and very risky. We have also had a great lesson about underground gold exchanges in the past.

Will removing the gold monopoly, allowing imports to increase supply, and even setting up a gold trading floor… stimulate the demand for investment in gold to continue to increase, sir?

Amending Decree 24 will “untie” the gold market, providing a more abundant supply to the market. It is also possible that when supply increases, at times when the world gold price is feverish, domestic gold investment demand will increase, creating gold fever. However, in the long run, I believe that increasing supply will make the market psychology more stable, making the market healthier and more sustainable.

Along with "unleashing" the gold market, authorities also need to issue many regulations on transparency in gold transactions, thereby reducing gold demand related to money laundering, making gold demand more substantial.

Source: https://baodautu.vn/khi-nguon-cung-doi-dao-thi-truong-vang-se-on-dinh-hon-d335282.html