On June 5, the State Bank of Vietnam (SBV) announced the direct selling price of SJC-branded gold bars at four state-owned commercial banks at VND76.98 million ($3,200) per tael, down VND1 million ($41.50) per tael compared to the previous day.

Central bank targets ongoing price control of gold market

With this reference price, the four banks - Vietcombank, VietinBank, BIDV, and Agribank - and Saigon Jewellery Co., Ltd. (SJC) offered a direct selling price that was around $40 more than the SBV announcement, and $80 more than the set price from two days previous.

“Apparently, people rushed into buying gold in the previous days and even yesterday, and have counted losses. The losses might even be bigger if people continue to rush on the gold market for speculation purposes,” said economist Le Xuan Nghia.

He explained that by market rules, for the gold price to go down, the quantity needs to be sufficient, and gradually increase, and the SBV has the total capacity to do this.

Statistics from the World Gold Council show that the volume of gold imports to meet domestic demand in Vietnam is just about 20-30 tonnes per year, equivalent to about $2.5-3 billion. This is deemed a low volume compared to the country’s current import turnover value approximating $200 billion, as well as the SBV’s foreign exchange reserves reaching $100 billion.

“In the long term, the SBV needs to hand back gold trading to jewellery businesses which are now in the restructuring process to boost market transparency, reduce speculation, and use tax tools to control the bullion market,” Nghia added.

On behalf of the SBV, Dao Xuan Tuan, director general of the Foreign Exchange Management Department, noted that the move to sell SJC gold bars directly to four state commercial banks SJC is to control and narrow the difference in the gold price between domestic and international market at an appropriate level.

“The efforts to narrow the gap would likely lead to further decreases in the selling gold prices in the forthcoming time. People, therefore, need to be very cautious when buying gold amid current volatile world gold prices,” said Tuan.

In recent times, the SBV has held a handful of auctions, supplying the market with 48,500 taels of SJC-brand gold bars, equivalent to more than 1.8 tonnes of gold.

The difference between the domestic price of SJC gold bars and the world price, however, still fetched high at about 20 per cent. According to experts, this illustrates that besides supply and demand factors, there might exist illegal acts such as price manipulation and speculation, causing instability in the market.

“The goal of the fresh measure is to shortly narrow the gap between domestic and international gold prices to a suitable and sustainable level,” said SBV Deputy Governor Pham Quang Dung.

“Along with this, we are joining efforts with relevant management agencies and the state inspectorate to inspect the law obedience in performing gold business of credit institutions and businesses. Serious punishments shall be applied to any violations,” he said.

Pham Toan Vuong, CEO, Agribank Agribank has fully implemented necessary conditions to start selling gold to the public from June 3. In the immediate future, the sales will take place in Hanoi and Ho Chi Minh City. We will monitor market developments to continue to expand, ensuring compliance with market demand. Basically, the procedures are convenient and simple. Customers, however, need to pay attention to personal identification procedures and ensure compliance with regulations on transactions, anti-money laundering, and legal invoice payments. With the responsibility of a commercial bank, we ensure to meet the legitimate needs of the people. Regarding the selling price, we participate in selling gold not for profit, but to achieve the goal of reducing the difference between domestic and international gold prices. Le Ngoc Lam, CEO, BIDV The plan to sell gold bars directly to state-owned commercial banks and SJC is the right policy. Our bank makes efforts to ensure synchronous implementation of the policy through specific solutions such as announcing the list of gold bar selling points, the time to start selling on the bank’s website, completing procedures for gold purchases with the SBV, and establishing a relevant distribution network in major gold trading areas. The move shall be deployed immediately in Ho Chi Minh City and Hanoi. We are happy to play a role in implementing the gold market stabilisation policy of the government and the SBV. The gold bars will be sold to people at suitable price levels based on the purchase price from the SBV. This will contribute to the early realisation of the goal to reduce the difference between domestic and world gold prices.