Proposing reputable enterprises that can import gold within the quota
Over the past several months, gold prices have fluctuated, with the difference between SJC gold and world prices reaching up to 18-19 million VND at times, even nearing 20 million VND per tael. In response to this situation, the Government and the Prime Minister have held numerous meetings and issued directives to the State Bank of Vietnam (SBV) to immediately stabilize the gold market.
Expressing concern, Mr. Tran Thanh Man, Vice Chairman of the National Assembly, said that the surge in gold prices, even surpassing 90 million VND per tael, would increase the import costs of goods, raw materials, and foreign loans for businesses, significantly impacting the domestic market.
Mr. Pham Thanh Ha, SBV’s Deputy Governor, explained that before 2012, the shortcomings of the gold market had prompted the urgent need for new regulations. As a result, the Government’s Decree 24 on gold business management was enacted, bringing relative stability to the gold market. However, in recent years, specifically since 2019, the COVID-19 pandemic has caused a global economic recession and high inflation. Additionally, escalating geopolitical tensions have led to a sharp rise in international gold prices, causing domestic gold prices to follow suit. Notably, since 2022, the domestic gold market has revealed limitations, with the gap between SJC gold bar prices and international prices consistently high.
“The reason for the high international gold prices has pushed up domestic prices. As of now, world gold prices have increased by about 14% compared to the beginning of the year. In addition, limited domestic supply has caused the gap between domestic and international gold prices to widen,” said the SBV leader.
In Vietnam, the gold price index in April 2024 increased by 6.95% compared to the previous month, up more than 17% compared to December 2023, and up 28.62% compared to the same period last year. On average, the gold price index increased by 20.75% in the first four months.
New sanctions are needed
It is undeniable that after 12 years of implementation, Decree 24 has accomplished its “mission” and has been instrumental in maintaining the stability and safety of the country’s finance.
However, the recent shortcomings in the gold market call for a new approach in management.
According to Mr. Huynh Trung Khanh, senior advisor to the World Gold Council in Singapore, Indonesia, Thailand, and Vietnam, the surge in SJC gold prices was due to the domestic market psychology, which pushed prices up.
“The SBV should consider increasing the amount of gold put up for auction, of course, taking into account the calculation of controlling exchange rates and gold imports, which means only importing a moderate amount of gold without affecting the exchange rate. At the same time, amend Decree 24 to eliminate the monopoly on SJC gold bars and allow reputable enterprises to import a moderate amount of gold raw materials… Only then will the gold market stabilize, and SJC gold prices will not be pushed up by market psychology,” Mr. Huynh Trung Khanh proposed.
“To amend Decree 24 and address the gold market issue, the solution is to balance foreign currency to import gold raw materials to increase supply to the market, thereby reducing the significant price gap,” said Dr. Truong Van Phuoc, former Acting Chairman of the National Financial Supervisory Commission.
According to Dr. Truong Van Phuoc, the large difference in SJC gold prices is due to supply and demand. If supply increases, prices will naturally decrease. “The SBV can use gold reserves or import gold for SJC to process or return SJC the right to produce gold bars. If the SBV chooses to spend foreign currency to import gold, this activity should be calculated into the total import turnover. At the same time, it is necessary to maintain foreign exchange reserves of at least 12 weeks of imports as recommended by the International Monetary Fund (IMF),” said expert Truong Van Phuoc.
“I propose that the SBV allow some gold traders to import to connect the domestic market with the world market and control their gold purchases with a quota for a year. With multiple sources of supply, no gold bar is state-protected, and all types of gold compete fairly, people have a variety of gold to choose from, and gold prices will stabilize due to the elimination of scarcity caused by monopoly,” said Dr. economist Nguyen Tri Hieu proposed.
In the long run, according to Dr. Nguyen Tri Hieu, it is necessary to issue gold certificates by the SBV. This mechanism allows the SBV to attract gold from the people on a voluntary basis and then issue gold certificates with flexible terms. As a result, the SBV can mobilize a large amount of gold and lend it to the Government and the Ministry of Finance. Then, the Ministry of Finance can use gold as collateral to borrow money from foreign organizations at preferential interest rates, helping Vietnam “turn gold into foreign currency” to serve production, business, and the country’s needs.
Mr. Dao Xuan Tuan, Director of the Foreign Exchange Management Department (SBV), said that regarding the gold market management policy in the coming time, the SBV has submitted to the Prime Minister a report on the summary and amendment of Decree 24, especially focusing on the issue of the State abolishing the monopoly on SJC gold bars and having more gold bar brands.
