The price of SJC gold bars remains around 13 million VND/tael higher than the global gold price. Photo: Như Ý
On April 16, in a press release, the SBV stated that it had just proposed that ministries and agencies coordinate to implement the Prime Minister’s directives on gold market management . Accordingly, the agency responsible for managing the gold market has requested that the Ministry of Finance support gold import clearance procedures. At the same time, the SBV proposed that the Ministry of Public Security coordinate to organize the auction of SJC gold bars safely and effectively.
Earlier, on April 15, the SBV announced that it would increase the supply of gold bars to the market through auctions in the coming period. Currently, 26 entities, including commercial banks and gold trading businesses, have transactions with the SBV. So far, 15 entities are eligible to participate.
In addition to supporting gold imports, the Ministry of Finance and the Ministry of Industry and Trade have also been requested to strengthen management of the gold market; requiring gold trading organizations, especially those trading in gold bars, to use electronic invoices. This aims to enhance transparency, improve the efficiency of supervision, and ensure a safe and transparent market. The SBV also proposed strict penalties for businesses that fail to comply with these regulations.
At the same time, the SBV also requested the provision of information on cases of gold smuggling and illegal transportation across the border in order to develop effective gold market management solutions.
For credit institutions and enterprises licensed to buy and sell gold, the management agency proposed that they strictly follow the invoice and voucher regime; apply electronic invoices; and comply with laws on anti-money laundering and counter-terrorism financing.
The gold market has been fluctuating continuously since the beginning of the year, with the price of SJC gold bars reaching a record high of VND 85.5 million/tael on April 15. After the auction announcement, the price of SJC gold bars dropped to VND 83.8 million/tael at 5 p.m. on April 16. Meanwhile, the price of gold rings reached VND 78 million/tael at one point and dropped to nearly VND 77 million/tael on April 16. The difference with the world price has increased significantly, with domestic gold rings being VND 5.5-6.5 million higher, while gold bars are around VND 13 million higher.
To stabilize the market, Prime Minister Pham Minh Chinh requested the SBV to immediately address the difference between domestic and global gold prices. The government leader also proposed that management agencies “put the interests of the nation and people first”, encourage the production and export of gold jewelry, and create jobs for workers.
Auctions are only a temporary solution
On April 16, at the workshop “Vietnam financial market in 2023 and prospect for 2024” organized by BIDV Bank, ADB and NFSC, Dr. Le Xuan Nghia, member of the National Monetary and Financial Policy Advisory Council, said that for a long time, there have been two issues that have been frequently mentioned in the gold market: gold hoarding and an unreasonably high difference between domestic and global gold prices. Currently, the fight against gold hoarding has been successful because the SBV has separated gold from the banking system (prohibiting gold from becoming deposits and loans in the banking system).
However, the remaining problem is the unreasonably high difference in gold prices, which remains a headache to this day. The root cause of this situation is that since the issuance of Decree 24 in 2012, the supply of gold has been cut off, businesses are not allowed to import gold, while the domestic demand remains at around 55 tons per year (according to the World Gold Council). “Eliminating the unreasonable difference between domestic and global gold prices requires trade measures, not monetary measures such as gold bar auctions. The simplest way is to allow gold and silver trading companies that meet the requirements to import and export gold. The government needs to use the strongest tool to address this issue, which is taxation. Currently, the electronic customs system is capable of effectively managing gold imports. For the domestic market, electronic invoices should be applied to the buying and selling of gold. That is enough,” said Mr. Nghia.
SBV Deputy Governor Pham Thanh Ha affirmed that the supply of gold bars will be increased. The aim is to address the difference between domestic and global gold prices. In addition, within April, the SBV will inspect the gold trading activities of gold businesses and banks.
According to Mr. Nghia, gold bar auctions may create short-term peace of mind for investors, but the most fundamental, long-term, and internationally accepted solution is to allow the free import and export of gold and apply appropriate tax policies.
Regarding the record increase in the global gold price, Mr. Nghia said that the main reason is that central banks have been buying up gold to increase their reserves. In such a context, the SBV should have studied increasing its gold reserves rather than putting gold up for auction. This may be a short-term solution but not a fundamental, long-term solution.
Regarding the concern that allowing gold imports will affect the exchange rate, Mr. Nghia said that the amount of foreign currency used to import gold is estimated to be not large, only about 3 billion USD, much lower than the import of gasoline or other types of fuel. Therefore, there is no need to worry about the exchange rate when allowing gold imports.
Mr. Nguyen Ba Hung, Chief Economist of the Asian Development Bank (ADB), said that demand exceeding supply is the reason for the high price of gold in the country. Meanwhile, the influence of the global gold price is only a minor factor.
Mr. Hung suggested that the government should consider managing gold as a monetary instrument, a financial product for investment, and also a basic commodity. Management will be more effective if these factors can be reconciled.
