Domestic gold price remains high despite the world price falls

Despite the sharp fall of the gold price in the world market and the low demand, the domestic gold price remains high, hovering around 28 million dong per tael, higher by 500,000 dong per tael than the world price

Gold price up, dollar price up

In the first months of the year, the domestic gold price was always lower than the world price. At that time, gold trading companies mostly exported gold under the mode of jewelry products. Vietnam exported 36 tonnes of gold in May and June, earning $1.4 billion.

However, since the end of June, the domestic gold price has been pushed up to the levels higher than the world price. The gap between the domestic and world price sometimes reached 700,000 dong per tael. While the State Bank did not grant quotas to import gold through the official channels, gold traders took full advantages of the domestic price increases to illegally import gold to Vietnam. Since traders did not have to pay tax, they could pocket fat profits from import deals.

Analysts said that the gap of 100,000 dong per tael between the domestic and the world prices would be big enough to bring profit to illegal importers. Meanwhile, the domestic gold price on July 20 was 500,000 dong higher than the world price.

Some goldsmith shops said that traders began collecting dollars last week to import gold, pushing the dollar price on the black market up again. The dollar price climbed from 19,170 dong per dollar late last week to 19,230 dong per dollar on July 20. Meanwhile, bankers said that the dollar price increase has prompted people to purchase dollar to store up. The volume of deposits in dollar at some banks in recent days tends to increase.

People do not like purchasing gold

By the afternoon of July 20, gold trading companies still said that they were waiting for the licenses to import gold from the State Bank of Vietnam. Several days ago, the central bank announced that it will grant quotas to import gold, but no license has been granted so far.

Meanwhile, traders have been trying to keep the gold prices high levels, reasoning the short supply is necessary because a big volume of gold was exported in May and June.

Tuoi tre newspaper cited the figures from the State Bank of Vietnam as saying the volume of gold kept by banks is still large, worth 90 trillion dong, or 120 tonnes.

According to the general director of a gold company belonging to a bank, Vietnam does not lack gold, but the gold price remains high. He said it is because the domestic gold market does not communicate well with the world market, while traders try to speculate gold to keep prices high. The world price has decreased by $30 per ounce, or 690,000 dong per tael since late last week. Meanwhile, the gold domestic price has decreased slightly by 300,000 dong per tael.

According to Nguyen Ngoc Que Chi, General Director of Sacombank Jewellery Company, because the gold price is high, people do not buy gold to hoard up these days. Chi said that the volume of gold traded every day is modest, from several hundreds to 1000 taels per day.

Statistics showed that the volume of gold exported through the official channel in 2008 and 2009 was less than 40 tonnes. In the first six months of the year, the volume of gold exported under the mode of jewellery products was 36 tonnes. Meanwhile, only the Saigon Jewelry Company imported six tonnes of gold.

In Vietnam, gold can be imported only when the State Bank of Vietnam grants licenses to import gold. However, the central bank always tries to restrict the imports, which explains why illegal imports have been so developing. Every time when the domestic gold price is higher than the world price, dollar traders try to store up dollars and raise the dollar price, because they know that gold traders will have to collect dollars to import gold illegally.

Therefore, it was not by chance that the State Bank last week announced that it will allow importation of gold with no limit in import volume. However, in fact, the State Bank does not wants gold to be imported, because this will lead to the more serious trade gap and put hard pressure on the dong/dollar exchange rate. This may be the reason why the State Bank has been slow in granting licenses.

Meanwhile, Nguyen Thi Cuc, Deputy General Director of Phu Nhuan Jewellery Company, has affirmed that the gap between the domestic and world prices will be surely narrowed if Vietnam imports gold.

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