Establishing a gold trading floor still needs research to suit actual conditions

Amidst the strong fluctuations in the financial market, the management of the gold and foreign exchange markets has become a key task of the State Bank of Vietnam (SBV). At the National Assembly's question-and-answer session this morning (November 11), SBV Governor Nguyen Thi Hong answered in detail questions related to these two key areas, and at the same time proposed specific solutions to ensure macroeconomic stability, towards sustainable development.

Governor of the State Bank of Vietnam Nguyen Thi Hong answers questions before the National Assembly

Efforts to stabilize the gold market

The gold market, as an important part of the financial economy, has attracted special attention from delegates. Delegate Luu Van Duc (Dak Lak) asked: On April 14, 2024, the Government Office issued Notice No. 160 on solutions to manage the gold market. The Governor was asked to tell how the State Bank has implemented these requirements in the past. What is the impact on current and future gold prices? Delegate Pham Van Hoa (Dong Thap) raised the issue: “The State Bank only sells gold bars to stabilize prices but does not buy them back. If people want to sell gold, what will they do when banks and stores do not buy? Does this lead to transactions on the black market? Why doesn't the State Bank expand its gold sales network to other provinces and cities?

Questioning, delegate Do Huy Khanh (Dong Nai) said that many countries have established gold trading floors to make the market transparent and attract resources. Does the State Bank have plans to build a gold trading floor?

Responding to the issues raised, Governor of the State Bank of Vietnam Nguyen Thi Hong said that the management of the gold market is always a focus of the State Bank with specific measures, both ensuring market stability and controlling potential risks.

Regarding measures to stabilize gold prices, the Governor said: The Vietnamese gold market is directly affected by fluctuations in international gold prices. Since 2021, world gold prices have increased sharply, peaking at 2,300-2,400 USD/oz in June 2024. This has caused domestic gold prices to differ greatly from international prices, at times reaching 15-18 million VND/tael.

To narrow this gap, the State Bank organized auctions and sold gold directly through four major commercial banks and SJC. After nine auctions, the gold price gap has dropped to only VND3-4 million/tael. This is an encouraging result, however, the gold market will still face unpredictable fluctuations because Vietnam does not produce gold and is completely dependent on imports.

Regarding the reason why the State Bank does not buy back gold, the Governor said that buying back gold poses many challenges, especially the issue of gold quality inspection. To ensure safety, the State Bank does not directly implement it but has licensed 22 credit institutions and 16 businesses to buy and sell gold bars. People can trade at these units.

“If people in some areas cannot sell gold, the reason may be due to the lack of resources of businesses or the characteristics of that area. The State Bank only grants operating licenses, not specific regulations on transaction locations,” the Governor said.

Regarding the construction of a gold trading floor, the Governor stated that the establishment of a gold trading floor can help make transactions transparent and facilitate market participants. However, this requires large investments in infrastructure, supply and human resources. “Therefore, we need to coordinate with ministries and branches to conduct thorough research before submitting to the Government. Regarding the gold trading network, businesses and credit institutions will assess local demand to expand their branches,” the Governor said.

Thus, the measures taken by the State Bank have contributed to stabilizing the gold market, reducing psychological pressure and maintaining economic stability. However, the construction of long-term mechanisms, such as establishing a gold trading floor, still needs further research to suit the actual conditions of Vietnam.

Ready to intervene to stabilize the foreign exchange market

The foreign exchange market, which plays a key role in maintaining macroeconomic stability, also received many questions from delegates. Delegate Pham Van Hoa (Dong Thap) said that the amount of remittances to Vietnam is very large, but the State Bank applies a 0% interest rate on foreign currency deposits. Meanwhile, the state borrows foreign capital at high interest rates. "Why not mobilize capital from the people at lower interest rates?", the delegate asked.

Delegate Tran Anh Tuan (Ho Chi Minh City) said that the trend of decreasing world interest rates and the increasing value of the USD has put great pressure on exchange rates and prices of imported goods. "What solutions does the State Bank have to stabilize the foreign exchange market and exchange rates in the coming time?", the delegate asked. Delegate Phuc Binh (Dak Lak) said that currently, many illegal foreign exchange trading floors are operating in cyberspace, especially Forex. What measures does the State Bank have to manage and prevent these activities?

Responding to questions from delegates, Governor of the State Bank of Vietnam Nguyen Thi Hong affirmed that the zero percent foreign currency deposit interest rate policy is aimed at limiting dollarization and encouraging people to convert foreign currencies into Vietnamese dong for investment in production and business. Previously, the foreign exchange market was often volatile, leading to macroeconomic instability. With the zero percent interest rate policy, the country's foreign exchange reserves have increased sharply, from more than 30 billion USD in 2015 to hundreds of billions of USD today.

“If foreign currency deposit interest rates are raised, people will benefit from both exchange rate and interest rate fluctuations, increasing the hoarding mentality and putting pressure on the market,” the Governor said.

Regarding exchange rate and foreign exchange market stability, the Governor emphasized that the SBV operates exchange rates flexibly within a band of ±5%. When exchange rates fluctuate sharply, we are ready to intervene by selling foreign currency to stabilize the market. At the same time, the SBV will strengthen communication activities to reduce speculation and unreasonable expectations from people and businesses.

Regarding the issue of handling illegal foreign exchange trading, related to unlicensed Forex trading floors, the Governor said that currently, only licensed credit institutions are allowed to trade foreign exchange. Unlicensed trading floors, especially in cyberspace, are often fraudulent in nature, causing great damage to participants. The State Bank has coordinated with relevant agencies to inspect and strictly handle violations.

Speaking to reporters from the Banking Times on the sidelines of the National Assembly, delegates said that the State Bank’s measures in managing the gold and foreign exchange markets not only address current challenges but also create a foundation for long-term stability for the economy. Solutions such as flexible exchange rate management, gold price stabilization, limiting dollarization and strictly controlling illegal transactions demonstrate the key role of the State Bank in maintaining macroeconomic stability. In the coming time, building long-term mechanisms will be an important factor for Vietnam to adapt to global economic fluctuations.

Source: https://thoibaonganhang.vn/thanh-lap-san-giao-dich-vang-van-can-nghien-cuu-de-phu-hop-voi-dieu-kien-thuc-te-157656.html