Importing gold to stabilize the market?

To manage the gold market and alleviate external pressures, the State Bank of Vietnam announced it is researching and amending Decree 24 to submit to the Government this month.

The fact that world gold prices reached their highest level in three months also led to an increase in domestic gold prices. After world gold prices surpassed $2,100/oz, SJC gold prices increased by 400,000 VND/ounce in both buying and selling prices compared to yesterday, reaching 78.8 million VND/ounce for buying and 80.8 million VND/ounce for selling. The gap between SJC gold prices and international gold prices continues to be high. Thus, since the fourth quarter of last year, after domestic gold prices began to trend upwards, the difference between domestic and international prices has widened and consistently remained at 15-20 million VND/ounce.

Therefore, narrowing the gap between domestic and international gold prices is one of the important and consistent directives of the Prime Minister . The State Bank of Vietnam is required to implement appropriate and effective solutions for managing and regulating the gold market in the first quarter.

By late afternoon on March 5th, the international gold price had briefly traded at $2,127 per ounce, an increase of approximately 0.6% compared to the beginning of the session. Therefore, the increase in domestic gold prices today is understandable. The issue lies in the price difference between domestic and international gold, which is around 17 million VND per ounce. Consequently, according to experts, resolving the supply and demand imbalance will be the key issue for the gold market.

The gap between the price of SJC gold bars and the international gold price continues to remain high.

Since Decree 24 on Gold Market Management was issued, establishing SJC as the national gold bar brand, the State Bank of Vietnam has not granted import licenses or minted any new gold bars for the market for over 10 years. Therefore, even when demand is not excessively high, and supply has not increased, the price of SJC gold bars has been significantly higher than the price of gold on the world market. Supplementing the supply of SJC gold bars can be considered a short-term solution.

Associate Professor Dr. Nguyen Huu Huan - Lecturer at the University of Economics Ho Chi Minh City, commented: "In the short term, the State Bank of Vietnam could allow gold imports, or import gold to produce more SJC gold. This would increase the supply of SJC gold and the price could decrease. Secondly, to avoid such a loss of foreign exchange, the State Bank of Vietnam could purchase gold through domestic gold trading units, which would limit our gold imports and meet the supply demand."

"From the perspective of gold as an investment asset, we need policies to regulate this market. Based on that, supply and demand need to be expanded, and we can regulate this through tax policies to ensure supply and demand meet," said Mr. Phan Le Thanh Long, founding chairman of AFA Group.

In the long term, experts suggest that the State Bank of Vietnam allow gold imports again to meet domestic gold production needs. This includes not only gold bars, but also gold rings and jewelry. To address the issue of gold bar supply, the participation of multiple entities and gold brands should be permitted, diversifying supply sources and creating competition in the market.

"It would be advisable to allow some large organizations, specifically banks, to offer branded gold products as before. Of course, there should be reasonable management of the annual quantity to help alleviate supply and demand imbalances. And I certainly believe that the price of branded gold will decrease, eliminating the current price discrepancies," commented economist Dinh The Hien.

Importing gold could reduce foreign exchange reserves held in USD. However, many experts argue that using USD to import gold only changes the type of reserve asset. Besides that, there are other proposals such as allowing gold account trading again to reduce the need for holding physical gold or establishing a physical gold exchange. And importantly, gold should be treated as a special commodity and its marketability increased.

On the global market, it's common for investors to sell gold and buy USD when the US dollar strengthens. However, the current situation seems to defy this pattern, with both the USD and gold prices rising globally. Domestic price increases are inevitable due to international influences. Therefore, appropriate policies are needed to manage the gold market and alleviate external pressures. The State Bank of Vietnam has stated that it is researching and amending Decree 24 to submit to the Government this month.

According to PV/VTV.VN

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