After a heat surge and a cool-down at the end of 2023, the domestic gold market has been experiencing strong fluctuations in price since the Lunar New Year. In particular, the scarcity of SJC gold and 24K gold rings has pushed prices to unprecedented levels.
“Manipulation” in pricing?
Public opinion wonders if the market is experiencing price manipulation or “collusion” to push up the prices of SJC gold and gold rings? Since the day of the God of Wealth (February 19) until now, the prices of 1-2 24K gold rings have consistently fallen into a state of scarcity, with many major brands announcing out-of-stock or only selling in small quantities.
In an interview with a reporter from Nguoi Lao Dong newspaper, gold businesspeople asserted that there is no “manipulation” of prices. However, in previous years, due to the rare occurrence of customers selling their SJC gold, there have been times when people buy large quantities of SJC gold, but the stores are not prepared and have to promise that they will have stock in a few days. The scarcity of supply has caused the price of SJC gold to increase.
The owner of a gold business in Hanoi also revealed that several intermediaries are hoarding SJC gold pieces in order to pressure the state agency to amend Decree 24/2012 on gold market management to allow businesses to import gold.
Customers buying gold in Ho Chi Minh City during the God of Wealth festival. Photo: HOANG TRIEU
A similar situation is happening with 24K plain gold rings. The director of a gold company in Ho Chi Minh City stated that gold rings have been highly sought after since the Lunar New Year, especially after the God of Wealth festival. Many people see that SJC gold is expensive, reaching up to 81 million VND per tael, so they switch to buying gold rings. Demand has increased while the supply from sellers is limited because they believe that prices will continue to rise. This shortage has resulted in price hikes, but it is normal market behavior and not a result of hoarding or manipulation. Due to the high selling prices, the company’s buying prices are also high with a difference of about 1 million VND per tael,” said the director.
Regarding 24K gold rings, Le Chanh, the owner of a gold shop in Ho Chi Minh City, said that in recent days, people have been selling more because they have made a profit. However, the price of gold rings continues to rise, as the world gold price has recently increased by over 50 USD/ounce, equivalent to about 1 million VND/tael.
Another reason for the sharp rise in the price of gold rings, according to Huynh Trung Khanh, Vice Chairman of the Vietnam Gold Trade Association (VGTA), is that consumers have switched from buying gold pieces to buying gold rings to avoid the risk of a decline in SJC gold prices due to intervention by the State Bank (SBV). As a result, the demand for gold rings has surged while the limited supply has pushed prices up.
Amending Decree 24 – How?
As of the end of March 4, businesses listed SJC gold prices at 78.6 million VND per tael for purchasing and 80.6 million VND per tael for selling, an increase of 400,000 VND per tael compared to the previous day. The prices of gold rings and other types of jewelry, both made of gold, also increased to 65.6 million VND per tael for purchasing and 66.8 million VND per tael for selling.
At these price levels, SJC gold is trading at a premium of 17-18 million VND per tael compared to the world gold price, and 24K gold rings are priced around 4 million VND per tael higher than 1-2 million VND per tael a few months ago.
In order to address the local scarcity and the steep rise in gold prices in recent days, Tran Van Dang, CEO of ASEAN Jewellery Joint Stock Company (AJC), has suggested that the SBV temporarily delegate the authority to import gold to several gold trading companies under major banks in order to supply gold to jewelry, including gold ring, manufacturers. Immediately, the prices of gold rings will go back to being on par with the world prices.
However, some VGTA leaders believe that this is just a temporary solution. The financial capacity and market experience of these gold trading companies under major banks are limited, and they may import gold at unreasonable prices.
Furthermore, the SBV is not a business entity, so it is not appropriate to delegate the import of gold to other units under Decree 24. The core solution to cool down the domestic gold market is for the SBV to propose to the government to amend Decree 24 in order to return the gold import rights to businesses.
According to VGTA, the SBV needs to investigate and assess the current demand for raw materials for gold production (about 20 tons/year). After that, the SBV should conduct surveys and inspections of the scale of operations, financial capacity, production plans, etc., of leading gold businesses to select a unit to be the main importer of gold.
At that time, the SBV would assume the role of granting import quotas and monitoring gold importers. Small businesses would register to purchase raw materials from these importers. “By doing so, gold prices in the domestic market will decrease in the blink of an eye, and the price difference between SJC gold, gold rings, and the world price will narrow significantly,” VGTA leaders hope.
TS Can Van Luc, a member of the National Financial – Monetary Policy Advisory Council, believes that it is necessary to adjust and amend some provisions of Decree 24 to adapt to the new circumstances. However, the general spirit is that the government and the SBV need to continue to adhere to the policy of anti-goldization, reducing the goldization in the process of amending mechanisms and policies for gold management and gold business activities, thereby reducing the dollarization of the economy.
According to this expert, the anti-goldization process as set out in the goals of Decree 24 has been successful, but since the decree was issued 12 years ago, it is now necessary to change and amend it in line with the current market situation. From there, establishing a balance between supply and demand relationships in the current market.
For regulations concerning businesses and individuals involved in gold, they also need to be reviewed and reassessed. Specifically, for gold import businesses, it may be possible to increase the number of licenses, but they must still meet the criteria specified by the government and the SBV and, of course, be subject to regular inspections and supervision. “The gold market will gradually stabilize with stable policies and stricter monitoring mechanisms. This will reduce speculation, hoarding, and price hikes in the gold market as seen recently,” said TS Can Van Luc.
Experts suggest that when there is high demand for gold rings and limited supply, businesses can convert gold jewelry into gold rings through manufacturing processes. However, the director of a gold company in Ho Chi Minh City said this solution may not be implemented since the gold shops would incur additional costs for refining the gold jewelry into 99.99% pure gold, without mentioning operational expenses. Furthermore, purchasing raw gold materials from unofficial sources without a certificate of origin is risky, so gold shops also limit their sourcing.
