Gold market needs transparent solutions

The domestic and international gold markets have experienced a volatile year. How to make the market transparent in the new year 2024 is the question that has been raised.

The last months of 2023 saw an incredible acceleration in gold prices in the Vietnamese market. (Source: Kitco)

Gold prices hit record high

The last months of 2023 have seen an incredible acceleration in gold prices in the Vietnamese market. On December 22, 2023, the price of SJC gold bars soared to nearly 77 million VND/tael, the highest in history, breaking the record of 74 million VND set in March 2022.

In 2023, after continuously increasing in January 2023, at times exceeding 69 million VND/tael, the domestic gold price decreased and fluctuated within a narrow range of around 67 million VND/tael for more than 5 months, from mid-February to the end of July.

For the whole year, the price of SJC gold bars increased by 9.4 million VND/tael. Specifically, from 67.4 million (January 15, 2023) to 76 million VND/tael on the morning of December 22. Meanwhile, the price of gold rings also increased by 8.05 million VND/tael, from 55.05 million VND/tael to 63.1 million VND/tael.

The reason for the increase in domestic gold prices is due to the impact of the recent high world price of more than 2,000 USD/ounce, in the context of the USD depreciation. After US economic data reinforced the possibility that the Federal Reserve (Fed) will cut interest rates in March 2024. At 11:00 am today, the world gold price stood at 2,053.2 USD/ounce, up 3 USD compared to early this morning.

Second, due to the context of escalating geopolitical tensions. The Russia-Ukraine conflict has been going on for a long time and shows no signs of stopping, and recently the conflict between Israel and Hamas - although there has been a ceasefire but it is unclear - has made gold considered a safe haven.

In this context, some banks and investment funds are turning to a more cautious trend and will invest in gold. As of the third quarter of 2023, central banks of countries have bought about 800 tons and may exceed 1,000 tons this year.

With domestic gold prices increasing in the context of the lowest interest rate on savings in Vietnamese dong in many years, the stock market also falling, and real estate stagnating. Besides, the end of the year is always the time when there is a large demand for gold storage.

According to economic expert Dr. Nguyen Tri Hieu, the reason for the high domestic gold price is not only affected by the world gold price. In addition, there are other reasons, the macro economy is in a difficult situation so investors are looking for an investment channel to make high profits.

In the context of complicated developments in the world and domestic gold markets, domestic gold prices fluctuated strongly, increased rapidly, negatively affecting the safety of the financial and monetary markets and social psychology, on December 27, in order to stabilize and develop a safe, healthy, effective and sustainable gold market, the Prime Minister immediately issued a telegram requesting the State Bank and relevant agencies to implement measures to stabilize the gold market.

The State Bank immediately issued a message affirming its readiness to intervene to stabilize the gold market and promptly study and amend Decree No. 24/2012/ND-CP of the Government; at the same time, the State Bank also issued a document requesting credit institutions; foreign bank branches; organizations trading in precious metals, gemstones, gold and payment intermediaries to seriously implement the enhancement of customer identification and customer transactions through income, verification of customer information, business activities, risk level of money laundering and origin of customers' assets; immediately report to the State Bank's Anti-Money Laundering Department when there are large-value transactions or suspicious transactions; promptly report and provide relevant information and documents to competent authorities in accordance with the provisions of law on anti-money laundering. Currently, according to Decision No. 11/2023/QD-TTg of the Prime Minister, from December 1, 2023, the large value transaction that must be reported is from 400 million VND or more.

The Prime Minister’s telegram was highly appreciated by economic experts. According to many opinions, this is a very timely directive to regulate domestic gold prices, especially SJC gold prices, and most importantly, it has “forced” the authorities to take urgent action.

Establishing a Gold Exchange to manage the gold market transparently and effectively

A Gold Exchange should be established to manage the gold market transparently and effectively, following the world trend, this is the recommendation of experts at the Seminar 'Solutions for developing a safe and sustainable gold market'.

According to Prof. Dr. Hoang Van Cuong, member of the National Assembly's Finance and Budget Committee, gold is a very special commodity, with the function of storing and preserving value, not simply producing jewelry. Vietnamese people have a high risk prevention, future planning, and hoarding mentality, so people have a need to own, buy, and sell gold bars.

According to Mr. Cuong, when gold is put into trading on the market, with public order matching, anyone participating will immediately know how many sellers and buyers there are in the market... Transparent information helps participants in this market make more informed decisions, especially if the State has better control.

Another important point is that if we have a gold market with trading accounts on the exchange, it will be easier to connect to the world market. It is not necessary to import, but we can place buy and sell orders to exchange world gold immediately, which creates price balance with the world trading market.

According to Mr. Cuong, when establishing a Gold Exchange, we need to consider what the model will be like. At the primary exchange level, only a few very professional traders will trade there and through international connections; and the secondary exchange is for retail trading, which can be freely traded domestically, so that we can prevent risks.

In addition, many opinions also suggest that it is necessary to build a legal framework for control, information technology to ensure goods on the floor... Those are the issues we need to pay attention to in order to create a legal framework and operating conditions to develop healthily both the physical gold market and the gold market on the floor.

Source: https://baoquocte.vn/truong-vang-ca-n-co-cac-gia-i-phap-minh-bach-hoa-260394.html