Expert Tran Duy Phuong stated that the main reason for the recent gold auctions attracting so few participants, to the extent that the State Bank of Vietnam (SBV) had to cancel them, was the regulation that the minimum number of winning gold lots be 14, equivalent to 1,400 taels.
“ This regulation discourages many businesses because their demand is not that high. For example, if they have sold only about 200 taels, having to buy 1,400 taels would exceed their demand. If the SBV reduces the minimum winning lot from 14 to 4-5 lots, or around 400-500 taels of gold, I am sure more businesses and gold trading organizations would participate in the auctions “, he said.
However, Mr. Phuong also predicted that gold bullion auctions after the April 30th holiday would be more successful. This is because during the holiday, businesses and gold bullion trading organizations would be able to sell thousands more taels of gold, and would then be willing to bid to buy back the amount of gold they sold to balance their positions.
“They could sell 5,000-6,000 taels of gold during the holiday and be willing to bid for 14 lots or double that to replenish their stock with the amount of gold they sold,” he said.
Two gold bullion auctions were canceled in just a few days due to insufficient participants (Illustrative image)
Moreover, according to Associate Professor Dr. Dinh Trong Thinh, the SBV should also review the reference price. The requirement to deposit 10% when bidding, when the reference price for the deposit is high, is also an issue that businesses and banks consider and calculate before participating in the auction.
” When businesses put up a large sum of money to participate in the auction, they have to calculate how to make a profit. Therefore, to make the next gold auctions more effective, the SBV needs to determine a reasonable auction price that meets the needs of businesses, which will make it easier to attract them “, said Mr. Thinh.
Meanwhile, Mr. Dinh Nho Bang, Vice Chairman of the Gold Trading Association, said that the very low number of bidders or the complete lack thereof proves that the gold auction regulations still have unreasonable conditions and do not adequately limit the risks for organizations participating in the auction.
Currently, capital is a major challenge for many businesses, which affects their decision to participate in the auction when they have to buy large volumes of gold.
Therefore, if the SBV revises the auction conditions to make them more attractive and businesses can balance the risks, more organizations will participate in the gold auctions.
Does the market lack gold?
In the past, when the domestic gold price rose continuously, one of the reasons given was the scarcity of supply. However, when the SBV auctioned gold to increase supply, the market absorbed very little. This has led many to wonder if the gold market is really short of supply.
“ This is an issue that I still think needs to be reassessed, especially after the rounds of gold releases into the market. If there is a shortage of supply, people would have to buy gold, even at a high price. But if there is no major shortage, they will consider the bid price to avoid making a loss. They may even choose not to buy more and just trade with their existing gold reserves “, an analyst said.
According to expert Tran Duy Phuong, there is a shortage of gold supply at businesses, but it is not a major shortage. Therefore, businesses and organizations participating in the auction only buy the amount of gold they need, according to their business requirements.
“ For example, if they sold a negative 1,000 taels last week, they need to buy 1,000 taels to offset the position they sold and buy a little extra to sell retail or meet other needs. This is when they will participate in the auction.
But if they only sold about 500 taels and the auction regulation requires them to buy at least 1,400 taels, the supply will exceed the demand. Therefore, this condition is discouraging businesses from participating in the auction “, he analyzed.
The expert also believes that at present, the gold price is fluctuating unpredictably and is very risky, and no business would buy gold for speculation. Therefore, the demand is not particularly high.
Earlier, on the morning of April 25, the gold auction was canceled because only one entity submitted a bid. This was the second time the SBV had to cancel a gold bullion auction. Earlier, on April 22, the SBV had canceled the first auction due to insufficient number of members registering to bid and depositing the required amount.
Thus, out of three gold bullion auctions held, only one was successful, on April 23. However, the amount of gold sold was only 3,400 taels out of a total of 16,800 taels of SJC gold bullion offered, with the winning bid being over VND 81.3 million/tael.
In that auction, only 11 businesses participated and 2 businesses won.
