Gold prices rise, savings interest rates fall.

Despite low demand, SJC gold bars continue to rise in price.

Despite the sharp drop in global gold prices on November 10th, SJC gold bars continued to rise, increasing by 200,000-300,000 VND per tael. Eximbank bought at 69.5 million VND and sold at 70.2 million VND. Meanwhile, Saigon Jewelry Company (SJC) bought at 69.3 million VND and sold at 70.3 million VND… Other gold trading units also bought and sold SJC gold bars at high prices. In the past four days, the price of SJC gold bars has fluctuated quite strongly, with increases and decreases of up to 2 million VND per tael. Those who bought gold three days ago at 68 million VND per tael have now made a profit of 1.5 million VND per tael, considering the increase.

SJC gold bar prices remain high.

However, buying gold carries many risks, and very often, even if buying low and selling high, gold buyers still make little profit because the selling price of SJC gold bars is consistently higher than the buying price by 1 million VND/ounce. Compared to world gold prices, SJC gold bars are up to 12 million VND/ounce higher. Conversely, gold rings narrow the gap, being only 1.35 million VND/ounce higher than world gold prices. SJC buys gold rings at 58.6 million VND and sells them at 59.55 - 59.65 million VND.

Domestic gold prices on November 10th moved in the opposite direction to the downward trend of international gold prices, losing $5/ounce to $1,955/ounce. Gold lost its upward momentum as the US dollar strengthened in the international market, with the USD-Index rising to 105.9 points. Information that the US Federal Reserve (Fed) may raise interest rates to bring inflation down to its target of 2% caused the US dollar to rebound, pushing gold prices down. However, some recent reports from international organizations suggest that gold is currently undervalued by 20%. The outlook for gold prices is expected to improve after surpassing $2,000/ounce if the Fed cuts interest rates next year.

Notably, despite remaining at a high level, domestic gold demand has not increased. According to a report by the World Gold Council (WGC), gold consumption in Vietnam decreased by 1% year-on-year, falling to 11.9 tons in Q3 2023, compared to 12 tons in Q3 2022. This decline is mainly due to a 14% year-on-year decrease in domestic jewelry demand. However, growth in demand for gold bars and coins compensated for this, increasing by 4% year-on-year, from 8.5 tons in Q2 2022 to 8.8 tons in Q3 2023. Jewelry demand in Vietnam in Q3 is at its lowest level since 2021. High inflation and slower-than-expected economic growth have impacted consumer purchasing power. However, the depreciation of the VND has prompted investors to take advantage of the August price correction as a safe starting point for strategic investments in gold bars and coins as an asset accumulation channel.

Savings interest rates hit rock bottom.

Meanwhile, money continues to flow into banks despite deposit interest rates still hitting rock bottom. The giant Vietcombank recently reduced its VND deposit interest rates by another 0.1-0.2% per year across various maturities, the second reduction in the past 10 days. Accordingly, interest rates for 1-2 month deposits are now 2.6% per year, 3 months 2.9% per year, 6-9 months 3.9% per year, and 12 months or more 5% per year. The three state-owned banks, BIDV, VietinBank, and Agribank, maintain higher interest rates than Vietcombank, ranging from 0.3-0.4% per year. Joint-stock commercial banks had previously reduced interest rates by 0.1-0.7% per year.

For example, on November 10th, SCB reduced deposit interest rates by 0.2 - 0.7%/year, bringing the interest rate for savings deposits under 6 months to 3.7 - 4%/year, 6 - 8 months to 4.9%/year, and 12 months or more to 5.4%/year. Sacombank's deposit interest rates also dropped to 3.4 - 3.75%/year for terms under 6 months, 4.8%/year for 6 months, and 5.4%/year for 12 months…

Since the beginning of November, more than 10 banks have reduced interest rates on Vietnamese Dong savings deposits, including BaoViet Bank, SHB, Bac A Bank, and Nam A Bank. Deposit interest rates at these banks have fallen below 6% per year, the lowest level since the Covid-19 pandemic in 2021 and also the lowest in the last five years.

A survey by the Vietnam Banking Association (VNBA) of 28 banks that published their Q3 2023 financial reports (accounting for approximately 75% of the total assets of the entire system and excluding Agribank) showed that as of the end of September, these banks had mobilized more than VND 9.3 million billion in customer deposits, an increase of 11.5% compared to the end of 2022. HDBank continued to be the bank with the strongest increase in deposit balances, rising by 58.3% since the beginning of the year, reaching VND 341,700 billion. In terms of absolute balances, BIDV held the top position with more than VND 1.58 million billion in customer deposits, an increase of 7.5% compared to the beginning of the year. This was followed by Vietcombank and VietinBank with deposit balances reaching nearly VND 1.35 million billion and VND 1.31 million billion respectively (increases of 8% and 5%).

Dr. Nguyen Huu Huan (Ho Chi Minh City University of Economics) commented: "Never before have savings interest rates fallen as much as they have now." However, he also believes that savings interest rates have already reached their lowest point and are unlikely to fall much further in the near future. The reason is that capital demand will increase towards the end of the year, so credit growth is likely to be higher, especially in November and December. Credit growth in 2023 is projected to reach 10%. When credit increases, it will consume the liquidity of banks. According to Dr. Huan, if savings interest rates fall too low, it will reduce the incentive to deposit money, so capital is likely to flow into other channels, and this will make bank liquidity less than before.

Moreover, the flow of cheap capital through other investment channels will cause inflation and financial bubbles. Citing the US as an example, Mr. Huan likened periods when interest rates reached 0% per year to times when the economy was in crisis. He likened 0% interest rates to the fact that monetary policy had no effect, therefore, lowering interest rates too much would be "self-inflicted." Therefore, according to this expert, the current low interest rate level is reasonable, and with increasing demand, savings interest rates may stop their recent downward trend.

Among joint-stock banks, Sacombank continued to lead in deposit balances, reaching nearly VND 507,833 billion, an increase of 11.7% compared to the end of 2022. Other banks in the Top 10 with the highest customer deposits include MB, ACB, SHB, VPBank, Techcombank, and HDBank. Meanwhile, credit outstanding at some banks increased slowly, leading to a reduction in deposit interest rates.

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