Gold fever remedy pays off

The central bank’s right remedy for the local gold market has paid off with the differential between local and gold prices narrowing to a mere 200,000 dong per tael on Monday from a wide margin of 4 million dong a fortnight ago.
The local gold price has been moving inversely with the global price after the State Bank of Vietnam last week allowed five banks to join forces with the bullion trader Saigon Jewelry Holding Co. (SJC) to contain the chaos.

As of 4 p.m. on Monday, SJC bought gold at 42.89 million dong a tael and sold it at 43.29 million dong, a slight fall of 110,000 dong per tael against the day earlier.

Meanwhile, the safe-haven asset on the European market was still on the rise with spot price quoted at US$1,659 for one ounce on Monday afternoon, up US$20.7 compared to the previous week.

One tael is equivalent to 1.2 troy ounces.

Most bullion-trading companies agreed that the public had been refraining from buying gold since last weekend, recording the selling number at SJC at around 8,000 taels on Monday compared to more than 20,000 taels sold out last Thursday.

Nguyen Cong Tuong of SJC said that demand for gold was on the downtrend, and therefore the gap between local and world prices had been substantially narrowed.

Meanwhile, an industrial source told that gold supplies released to the market by local traders, who were allowed to sell gold deposits, had exceeded 10 tons for the last four days.

The central bank’s recent policies are effective, lowering the local price to a level almost equivalent to that of the world price, minimizing gold-smuggling and pressure on the foreign exchange rate, commented Le Tham Duong, head of Business Faculty of the HCM City Banking University.

Regardless of these results, the State Bank of Vietnam (SBV) should pay attention to other side-effects as well, Duong noted.

Also, Duong suggested SBV explain the reason it had allowed only five credit institutions to sell gold deposits and considering another solution in which other lenders are permitted to mobilize gold.

According to Duong, SBV should apply the ceiling interest rate for gold mobilization at 0.5% per annum to make Vietnam dong stronger than gold, as residents will shift their investment from gold to dong deposits with an annual cap of 14%.

Gold accounts connecting the domestic and world markets are needed to stabilize the gold market at home, said Truong Van Phuoc, general director of Vietnam Export Import Commercial Bank (Eximbank).

The problem is that the central bank has to directly control the market in a strict way, Phuoc stressed.

Saigon Times Daily

Tags: vietnam gold, Vietnam gold market, Vietnam gold prices