Gold Market Anticipates SJC Gold Auction
On April 19, State Bank of Vietnam (SBV) announced the SJC gold bar auction. However, on April 22, SBV postponed the auction to April 23 due to insufficient registration and deposits by participants. According to the revised announcement, the auction will offer 16,800 taels of gold, unchanged from the initial notice. However, the deposit has been reduced to 80.7 million VND per tael (a decrease of 1.1 million VND).
Gold Market awaits the outcome of SJC gold bar auction on April 23. Photo: Như Ý
Minimum bid quantity per participant: 14 lots (equivalent to 1,400 taels). Maximum bid quantity per participant: 20 lots (equivalent to 2,000 taels). Bid increment: 10,000 VND per tael. Each participant can only submit one minimum price, which must be equal to or higher than the floor price set by SBV.
Eligible participants include financial institutions and businesses that meet the conditions outlined in SBV Circular 06/2013 on trading gold bars in the domestic market. SBV also noted that if it cannot purchase gold from the international market due to insufficient supply from partners, the auction results will be canceled.
Gold market fluctuated unusually on April 22, particularly with SJC gold bars. Businesses widened the buying and selling spread to mitigate risks. SJC gold bars briefly dropped 1 million VND per tael to 83 million VND per tael. At the end of the trading session on the same day, Saigon Jewelry Company listed SJC gold bars at 81 – 83.5 million VND per tael. The buying and selling spread increased to 2.5 million VND per tael.
Ring gold prices of other brands remained around 76 million VND per tael. Bao Tin Minh Chau Company quoted round rings at 74.68 – 76.38 million VND per tael for buying and selling, respectively. The buying and selling spread was 1.7 million VND per tael. Saigon Jewelry Company quoted ring gold at 74 – 76 million VND per tael, with a buying and selling spread of 2 million VND per tael.
On April 22, SBV adjusted the central exchange rate to 24,272 VND per USD. With a margin of +/-5%, commercial banks can trade USD between 23,059 – 25,485 VND per USD today. USD prices at banks increased significantly to the maximum allowed. Specifically, Vietcombank quoted USD at 25,175-25,485 VND for buying and selling, up 12 VND compared to the end of last week.
**Gold Price Unlikely to Drop Significantly Due to Stopgap Solution**
In an interview with Tien Phong News, independent financial expert Tran Duy Phuong opined that the gold auction announced by SBV is not appealing to gold trading businesses at this time. According to Phuong, SJC gold bars are currently priced high, while the minimum quantity that businesses can purchase is only 1,400 taels. With this quantity of gold and a deposit of 80.7 million VND per tael, which is only 300,000 VND per tael lower than the market buying price, businesses face significant risks. “Businesses are hesitant to hold gold at this time. I believe it will be challenging to successfully auction the 16,800 taels,” said Phuong.
Phuong predicts that only about 5,000 taels of gold will be successfully auctioned with a winning bid of 82 million VND per tael. After the auction, the SJC gold price may only decrease to 81 – 82 million VND per tael and unlikely to go lower. Unless the global gold price falls sharply, SJC gold will not drop below 80 million VND per tael.
According to Phuong, the domestic SJC gold price is currently about 11 million VND per tael higher than the global price, excluding taxes and fees. To narrow the gap with the international gold price, the auctioned gold price must be lower, providing businesses with margins to adjust their prices.
Observing the market over the past few days, Phuong noted that ring gold prices of major brands are hovering around 76 million VND per tael despite rising global gold prices. This is partly due to the impact of SBV’s gold bar auction. Many people are waiting for the SJC gold price to decline, and if the spread is not too high compared to ring gold, they will be more inclined to purchase gold bars.
“The gold bar auction significantly influences the sentiment of potential gold buyers and holders,” said Phuong.
An expert from the Vietnam Gold Business Association stated that the gold auction is merely a temporary measure to increase supply in the market. The winning bid will be lower than the current market price, but not significantly lower, as the highest bidder wins the auction. Therefore, the gold auction is only a stopgap solution to provide a quick supply of gold to the market, not a fundamental solution to address the unreasonable gold price disparity as directed by the Prime Minister.
“We have repeatedly recommended abolishing the monopoly on SJC gold bars to cool down the gold price, as the auction will not resolve the issue. SBV will not hold just one auction but multiple auctions. In that case, continuously importing and auctioning gold will impact the exchange rate, considering the current high USD price. This is not desirable,” said the expert.
The expert emphasized that even SBV cannot ensure whether the gold auction will reduce people’s demand for gold. “If demand continues to rise, SBV’s repeated auctions to increase supply will lead to a situation of gold hoarding in the economy,” said the expert.
Strict Handling of Negligence, Smuggling, and Gold Price Inflation
Prime Minister Pham Minh Chinh has recently issued Directive No. 12 on key tasks and solutions to promote socio-economic development. The Prime Minister requires the Ministry of Finance to promote and control the healthy, safe, and efficient development of financial, stock, and corporate bond markets; promptly detect and strictly handle violations. Swiftly implement necessary measures to upgrade the Vietnam stock market from a frontier market to an emerging market within 2024.
The State Bank of Vietnam should manage interest rates and exchange rates in a timely, flexible, harmonious, and reasonable manner, aligning with market conditions, macroeconomic developments, and monetary policy goals. Inspect, scrutinize, and strictly handle cases of negligence, smuggling, and gold price inflation. At the same time, regulate and respond effectively to businesses’ and individuals’ foreign currency needs; reduce lending interest rates; and accelerate the disbursement of the 120 trillion VND credit package for investors and homebuyers of social housing projects.
LUAN DUNG
