Increased supply, gold market is less 'hot'

After more than 13 years, the gold market will have more gold bar brands, ending the monopoly of SJC. Qualified businesses and commercial banks are also licensed to produce gold bars.

This is a regulation in Decree No. 232 recently issued by the Government , amending and supplementing a number of articles of Decree No. 24 on management of gold trading activities.

Sharing with VietNamNet reporter , Dr. Le Xuan Nghia, former Vice Chairman of the National Financial Supervision Committee, assessed that these changes will make the gold market more transparent; at the same time, contribute to increasing the gold supply, reducing cross-border smuggling, helping the Central Bank control foreign currency in and out of gold exports.

More importantly, ending the monopoly on gold bars will help narrow the gap between domestic and world gold prices, which is no longer unreasonably high as it is now.

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The price of SJC gold bars has increased sharply recently mainly due to the scarcity of supply. Photo: Minh Hien

“The domestic gold price will decrease in the near future. Commercial banks are familiar with daily USD transactions with international markets, and understand the prices and trading methods, so they can carry out gold import and export activities very quickly. The remaining issue is whether the State Bank will grant licenses quickly or not,” said Mr. Nghia.

According to expert Le Xuan Nghia, if commercial banks have charter capital of VND50,000 billion or more, there will be about 5-6 banks, along with gold trading enterprises, allowed to import and export gold. At that time, it is possible to establish a physical gold floor to auction and test gold quality according to international standards, thereby helping domestic gold prices closely follow international gold prices every day, every hour.

“The gold trading floor will auction wholesale purchases, then these units will redistribute them to gold and silver stores. Thanks to that, prices will be more transparent, creating a smooth gold market from the import stage to the floor to the retail point. Along with that, currency and tax management will be very convenient if a gold trading floor is formed in the future,” Mr. Nghia analyzed.

Gold expert Tran Duy Phuong said that recently, the domestic SJC gold price has increased rapidly and is almost completely separate from the world price. The main reason is the scarce supply. For about a year now, the State Bank has not sold stabilized SJC gold to Big4 banks and SJC Company.

Meanwhile, demand for gold remains very high. The imbalance between supply and demand has pushed domestic gold prices to record levels.

In this context, according to Mr. Phuong, the issuance of Decree 232, which amends and supplements, including the removal of the monopoly on SJC gold bars, will open up opportunities for the market to have more gold bar brands. Banks and businesses that meet the conditions can produce gold bars, helping to increase choice and create competition.

Although SJC gold bars still account for 80% of the market share and consumer habits are difficult to change in the short term, the appearance of other brands will create competition, bringing more choices for buyers.

"More importantly, Decree 232 allows the import of raw gold for businesses to produce gold bars. Thanks to that, SJC as well as other businesses can proactively balance demand and supply to apply for licenses to import and produce gold bars to supply the market," Mr. Phuong assessed.

When will the gold price drop to 100 million VND/tael?

Gold expert Tran Duy Phuong said that the new regulations on eliminating the monopoly on gold bars and the import and export of raw gold have significantly "untied" the market, overcoming the shortage of gold bars, gold rings, gold jewelry... that has existed for more than 13 years since the issuance of Decree 24.

"When supply improves, scarcity decreases, the market will be less thirsty for gold and will cool down, narrowing the gap between domestic and world gold prices, which is currently up to 18-19 million VND/tael," said Mr. Phuong.

However, the expert noted that the market will have a certain delay. "In the short term, the price difference will hardly decrease from VND20 million/tael to VND9-10 million immediately, but will gradually narrow. It will take a few months for the difference to fall to about VND7-8 million/tael," Mr. Phuong analyzed.

According to him, the process of importing and producing gold requires quota registration and approval from the State Bank, so it will take at least October for the mechanism to operate smoothly. At that time, the source of imported gold for production and supply to the market will take another 2-3 weeks.

However, as soon as the decree was issued, the psychological factor in the market changed. Buyers no longer had the mentality of “buying gold at all costs”, while investors holding SJC gold who wanted to sell for profit decided to sell. This will help the market to ease tension before the official imported supply arrives.

Answering the question of when will the domestic gold price drop to 100 million VND/tael? The expert said that with the world gold price of 3,370 USD/ounce, the converted price of Vietnamese gold is about 108 million VND/tael. Adding all kinds of costs and fluctuation amplitude, the domestic gold price is about 114-115 million VND/tael.

"Thus, for the domestic gold price to fall to the 100 million VND mark, the world gold price needs to fall by about 300 USD, to 3,000-3,050 USD/ounce. Whether the domestic gold price will reach the 100 million VND/tael mark or not depends on many factors, in which the world gold price plays a decisive role," said Mr. Phuong.

The Ministry of Finance wants to adjust the gold export tax to 0% The Ministry of Finance proposed to reduce the export tax rate of gold jewelry and fine art products belonging to 4 codes from the current level of 1% to 0% to support cost reduction for businesses.

Source: https://vietnamnet.vn/xoa-doc-quyen-vang-mieng-kich-ban-nao-gia-vang-ve-moc-100-trieu-dong-luong-2436708.html