Ready to intervene to stabilize the gold market

Deputy Governor Pham Thanh Ha affirmed: The State Bank will continue to closely monitor developments in the gold market and, if necessary, will have an intervention plan according to the provisions of Decree 24. In January 2024, the State Bank will submit a summary report on Decree 24, including proposals for market management solutions appropriate to the new situation. In addition, the State Bank will coordinate with the Ministry of Public Security and relevant agencies to effectively manage the gold market. Given the complicated developments in the gold market, the State Bank recommends that people be cautious when trading gold.

Gold prices fluctuate strongly and contain many risks.

From the beginning of December 2023 to now, the international gold price has increased sharply above 2,000 USD/oz. On December 26, 2023 alone, the international gold price was trading around 2,063 USD/oz, an increase of 232 USD/oz (equivalent to an increase of 12.7%) compared to the beginning of the year. In response to the increase in international gold prices, the domestic SJC gold bar price has increased accordingly. On December 26, 2023 alone, the SJC gold bar price fluctuated strongly, reaching 80 million VND/tael at noon. However, on December 28, after the Government 's message, especially from the State Bank of Vietnam, that it would continue to closely monitor the developments of the gold market and, if necessary, have an intervention plan according to the provisions of Decree 24, the gold market has cooled down.

With a solid macroeconomic foundation, there will be no more gold speculation chaos.

If the gold price reached 80 million VND/tael in the early morning, by 3:10 p.m. on December 28, at Bao Tin Minh Chau, the SJC gold price had dropped to 71.4-75.3 million VND/tael. Meanwhile, the SJC gold price at Saigon Jewelry Company remained at the same listed price as at 2:00 p.m. at 73-76 million VND/tael; DOJI Group applied the price of 71.5-76.5 million VND/tael. Thus, gold buyers on the morning of December 28 immediately lost 7-8 million VND/tael. This is also the sharpest decrease in many years.

However, at 4:00 p.m., at Saigon Jewelry Company, the price of SJC gold had increased by VND1.5 million/tael in both buying and selling directions compared to the bottom at 3:00 p.m., listed at VND74.5-77.5 million/tael. Similarly, DOJI Group increased the price of gold to VND71.5-77.0 million/tael. Bao Tin Minh Chau also increased by nearly VND2 million/tael compared to 1 hour ago, currently listed at VND73.35-77.3 million/tael.

According to experts, the increase in domestic SJC gold bar prices is mainly due to market psychology due to the rapid increase in world gold prices. Dr. Truong Van Phuoc, former acting Chairman of the National Financial Supervisory Commission, commented that domestic gold prices fluctuated strongly and were compatible with the strong fluctuations in international gold prices.

Explaining the reason for the strong fluctuations in international gold prices, Dr. Phuoc said that it could be due to changes in the monetary policy stance of many major commercial banks, especially the FED. Accordingly, after a period of rapid and strong interest rates, bringing the overnight lending rate in the US to 5.25% - 5.5%, the FED is signaling that it may cut interest rates several times in 2024. When interest rates decrease, stocks or gold prices increase very strongly. Fluctuations in gold prices on the international market lead to fluctuations in domestic gold prices.

Sharing the same opinion, Dr. Le Duy Binh - Director of Enocmica also said that, in addition to the world gold price factor, the fluctuations in the gold market in the recent period were also due to psychological factors. When investors saw the gold price increase, while at this time there were not many investment channels, making it easy for investors to switch to buying gold with the expectation of making a profit from this precious metal. However, with the continuous fluctuations in gold prices with a wide buying and selling price range and the difference with the international gold price, this market is containing many risks for both individual and institutional investors.

Will study management policy

The gold market is operating under the legal framework of Decree 24/2012/ND-CP. According to the provisions of Decree 24, the State Bank is assigned to organize and manage the production of gold bars. Saigon Jewelry Company Limited - SJC was chosen as the national gold bar brand.

Sharing more specifically about the context of the issuance of Decree 24, Dr. Le Xuan Nghia - Member of the National Monetary and Financial Policy Advisory Council said that in the period of 2011-2012, inflation increased sharply, at times reaching 18%, the goldification of the economy was quite worrying, even panic; the gold price was adjusted up 35 times a day, adversely affecting macroeconomic stability. In that context, to stabilize the gold market, especially to combat dollarization, the State Bank of Vietnam was forced to advise the Government to issue Decree 24. Thanks to this Decree, over the past 12 years, Vietnam has gradually limited the phenomenon of "goldification", "dollarization" and gradually raised the position of the VND.

Affirming that in recent times, Decree 24 has played a very good historical role in the effort to combat gold and dollarization, Dr. Truong Van Phuoc said that there is an imbalance in supply and demand leading to a large gap between SJC gold bars and other gold brands. This is an issue that the State Bank needs to study to have an adjustment policy that is in line with the spirit of Decree 24 when it was issued, which is that the State Bank has the role of stabilizing and intervening in the gold market.

Sharing the same view, according to Dr. Le Xuan Nghia, in the previous period, the State Bank's management of gold bar production as Decree 24 was appropriate and helped reduce the phenomenon of goldification of the economy sharply. However, now, the macroeconomic situation has changed, this should be reconsidered.

“Vietnam has maintained macroeconomic stability for 10 consecutive years. The SBV's experience in fighting inflation has reached another level. It can be said that domestic and international investors are completely confident that the SBV can control monetary policy, at least in terms of keeping the currency's value stable. That amount of time is enough to create a general market sentiment of complete confidence that there is no longer a close connection between inflation, gold, interest rates, and exchange rates as before, but gold has separated and become a normal commodity, no longer a speculative commodity as before,” said Dr. Le Xuan Nghia.

Experts also acknowledged the Government's and the State Bank's efforts in managing the macro economy, especially controlling inflation, as very professional and experienced. This proves that despite many ups and downs, especially during the years of the Covid pandemic, Vietnam's inflation rate is one of the lowest among developing countries.

With such a solid macroeconomic foundation, Dr. Nghia said, there will be no more chaotic gold speculation. This is a ripe opportunity to adjust policies. “Now is the opportunity to manage gold in a different way, in which the State Bank, as the final buyer and seller in the gold market, can buy or sell gold reserves to balance the market. In addition, the State Bank can manage the market through monetary policy to maintain macroeconomic stability and the gold market,” Dr. Le Xuan Nghia suggested a solution.

As one of the experts who contributed to the gold market management policy, Dr. Truong Van Phuoc said that the State Bank is studying to adjust this policy. But in the immediate future, it is necessary to increase supply to balance market demand and gradually narrow the gap in gold prices.

Regarding the proposal to return the gold market to self-regulation, according to Dr. Phuoc, this is not new and it is a fundamental principle in a socialist-oriented market economy. However, the issue of regulating the gold market in a way that is compatible with international practices and suitable to the characteristics of Vietnam is important.

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