Fierce competition in gold market
The narrow range between buying and selling prices of gold in the recent time has been considered enlarging the competition in the gold market, in which unhealthy competition has already been seen such as cheating on the purity of gold.
Significant fluctuations
Reaching the 30 million dong per tael threshold as the global gold prices rises, domestic gold price shows no sign of falling; instead, it goes up sharply day by day. In the afternoon of September 27 alone, gold price suddenly rose up by nearly 200,000 dong per tael, setting a new record of 31 million dong per tael, while at the same time the global gold price was witnessing a clear downtrend. Till September 28, domestic gold price was in tune with the global gold price, it fell strongly to the popular level of 30.65 million dong per tael for buying price and 30.71 million dong per tael for selling price.
After a single night, to the noon of September 28, domestic gold price was down by 150,000 to 200,000 dong per tael, compared to the record set before. Despite thriving again after a long time observing the significant fluctuations of gold price, trading volume in the last two days has not yet seen as considerable. The price fluctuations within just one or two days would make the public and speculators more cautious.
The sharp escalating of domestic gold price has narrowed the gap between domestic and global gold prices. Calculations show that before tax and other costs, domestic gold is currently cheaper than global gold (converted) about 200,000 dong per tael. If adding all tax and costs, domestic gold will be cheaper than global gold (converted) about 150,000 dong per tael. Compared to the time domestic gold price was popularly lower than global gold price about 400,000 to 500,000 dong per tael, the current gap is narrowed to about one third.
For such gap between prices of domestic and international gold, director of a gold trading company said both gold imports and exports would not be in favourable condition, even with the permission of the authorities. However, this is not entirely a worrying gap, many gold trading companies are having big concerns on the difference between buying and selling prices in the country, which has unbelievably been narrowed by some companies in the recent time.
Bao Tin Minh Chau Jewellery Company’s general director Vu Minh Chau said, there has never been such a competition leading to fierce dumping as in the recent time. Some companies obtained just 2,000 to 3,000 dong profit while paying about two million dong, equivalent to profit ratio of 0.15 percent. During the time gold price was about five million dong per tael, average profit was usually 50,000 to 100,000 dong per tael (one to two percent of turnover). With gross profit of just about 50,000 dong per tael (down by five times compared to the peak time in the past), the net profit, according to Chau, might fall by 70 to 80 percent.
The above narrow range between buying and selling prices is considered unreasonable, because with couples of thousand dong per tael profit, companies could not cover cost of production, business and tax. Nevertheless, according to various representatives of gold trading companies, gold shops or small companies are still able to compete with other big names by cheating on the purity of gold and jewellery. By doing so, they even reap greater profit.
According to Chau, this behaviour is not only causing damages to consumers, but also make consumers to no longer believe and turn their back to domestic products, by chance stimulating smuggling. In order to avoid dumping, gold trading companies in Hanoi will propose price unification, setting a reasonable gap between buying and selling wholesale and retail prices. Many companies suggested the reasonable difference should be one percent, after referencing the previous adjustments of the recent years. – Laodong
Tags: vietnam gold, Vietnam gold market
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