'Increasing supply through gold auctions, reducing the price gap between domestic and world'

No notification of gold auction received yet

On April 12, the State Bank announced that it would immediately increase the supply of gold bars to handle the high difference between domestic prices and world prices. For the jewelry and fine art gold market, the State Bank will continue to create maximum conditions to ensure sufficient raw materials for production activities to export jewelry and fine art gold.

Today, April 15, the State Bank announced that it has completed preparations for the gold bar auction, aiming to increase the supply of gold to the market. Thus, after 11 years, the State Bank has returned to organizing gold bar auctions.

Specifically, the State Bank will send out a bidding notice 1 day before the bidding. After announcing the floor price, credit institutions and gold trading enterprises will begin filling out bidding forms.

The participating units have 30 minutes to decide on the volume and purchase price. One hour after the bid closing, the State Bank will announce the results. Enterprises will have to deposit to participate in the bidding, no later than 5:00 p.m. on the day of receiving the bid notice.

Currently, there are 26 units including commercial banks and gold trading enterprises establishing gold bar trading relationships with the State Bank. Of these, up to this point, about 15 units are qualified to participate in the bidding. The type of gold put up for bidding is SJC gold bars.

Up to now, the Vietnam Gold Business Association has not received any official notice about businesses registering to participate in gold bidding.

Speaking with Thanh Nien this afternoon, Vice President of the Vietnam Gold Business Association Nguyen The Hung said that up to now, the Vietnam Gold Business Association has not received any official notice about businesses registering to participate in gold bidding.

Economist Ngo Tri Long analyzed that currently, Vietnam does not use gold accounts but physical gold. The reason for the difference between domestic gold prices and world gold prices is supply and demand. "There is no supply but demand is still increasing, the world gold price increases, the domestic gold price increases. If the supply is even less, the price gap will become even larger," said Mr. Long.

This expert emphasized that the increase in supply through the State Bank's gold auction will be carried out until there is a balance to reduce the imbalance between supply and demand, at which time the domestic gold price will approach the world gold price.

However, increasing the supply of physical gold to ensure the balance of supply and demand and reduce the difference between the price of Vietnamese gold and the world price of gold is only a temporary solution. Bringing out a lot of physical gold can lead to the phenomenon of people rushing to buy gold.

"In the current context, it is necessary to synchronously deploy solutions and amend Decree 24 on gold trading management," Mr. Long expressed his opinion.

Commodity exchanges should be allowed to trade gold soon.

According to PhD student Nguyen Nhat Minh (Institute of Banking Science Research, Banking Academy), the sharp increase in gold prices in recent times, even in late 2023, does not affect inflation or the prices of other goods too much.

Stabilizing the gold market helps to gradually narrow the gap between domestic and world gold prices, thereby limiting speculation and smuggling.

However, when asked whether it is possible to let gold prices go up and down like stocks or other investment channels, Mr. Minh expressed his opinion that in the coming time, it is still necessary to stabilize and strictly manage the gold market.

"Stabilizing the gold market helps to gradually narrow the gap between domestic and world gold prices, thereby limiting speculation, price hikes or gold smuggling for illegal profits, causing potential risks to the domestic gold market in particular and the entire economy in general," said Mr. Minh.

According to expert Ngo Tri Long, we must shift from trading gold bars to trading other gold products (gold certificates, derivative instruments...) on a centralized trading center.

It is necessary to soon allow commodity exchanges to trade gold futures through futures contracts and options contracts like advanced countries in the world. Participating members must meet strict standards and be allowed to import and export gold (based on the specifications of the gold standard futures contract issued by the commodity exchange).

"Investors do not need to bring gold to or from each transaction, but can deposit it at depository centers (which is the commercial banking system), which will be more convenient, faster, and less risky than the traditional method of buying and selling gold.

The buying and selling prices are recorded on the customer's gold account number, so they can immediately know their profit or loss when the gold price goes up or down. This helps avoid the expense of importing physical gold to sell to people," Mr. Long emphasized.

In principle, if we combine and balance state management measures from different perspectives, the gold market will operate more effectively. Specifically, combining gold management as a monetary tool and a financial product for investment, and also as a commodity with supply and demand.

Mr. Nguyen Ba Hung, Chief Economist of ADB Resident Mission in Vietnam

Regarding stabilizing the gold market, answering Thanh Nien 's question at the recent press conference of the Asian Development Bank (ADB) in Hanoi, Mr. Nguyen Ba Hung, Chief Economist of the ADB Resident Representative Office in Vietnam, acknowledged that gold is a basic commodity. Regarding state management of gold, the current approach of the Vietnamese Government is still to control the gold market administratively.

"In principle, if we combine and balance state management measures from different perspectives, the gold market will operate more effectively. Specifically, combining gold management as a monetary tool and a financial product for investment, and also as a commodity with supply and demand," said Mr. Hung.

Last week, the world gold price traded in the range of 2,300 - 2,360 USD/ounce until Wednesday. On Thursday, the gold price increased sharply, reaching a peak of over 2,400 USD/ounce, amid increasing tensions in the Middle East. On Friday, the gold price continued to increase to 2,431.59 USD/ounce, then closed the week down.

The world gold price this morning, April 15, increased sharply again. At 9:00 a.m. this morning, the world gold price was trading at 2,354.15 USD/ounce, equivalent to 72.32 million VND/tael.

Kitco News’ latest weekly gold survey shows that experts are optimistic about the outlook for gold prices. Geopolitical risks will continue to push gold prices higher.

According to a Wall Street survey on Kitco News, 83% of analysts forecast gold prices to rise, 17% predict a fall. No experts have a neutral view.

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