VIETNAM Government at loss over gold price disparity

Government at loss over gold price disparity

VietFinanceNews.com - The gap between domestic and global gold prices remains large despite the Government's efforts, according to independent market experts.

Experts said in April that the State Bank of Viet Nam issued a decree to restrict trade in gold bullion to stabilise the gold market, check hoarding and speculation, narrow the gap between the domestic and global gold prices, and minimise the influence of the gold market on monetary policy.

However, gold prices vary greatly between domestic and global markets, causing difficulties for authorised agencies to regulate the exchange rate and implement monetary policies.

At the last session late last week, global gold prices continued to drop by 3.72 per cent, while domestic rates remained unchanged.

On the morning of May 14, global prices stood at US$1,538.10 per ounce.

Meanwhile, the domestic price of gold bullion dropped by VND100,000 to VND41.1 million per Thang Long gold tael and VND41.67 million for SJC Gold.

The gap between global and domestic gold prices was VND2 million per tael.

Do Minh Phu, chairman of the Doji Gold and Gems Group, said the major difference between global and domestic gold prices was not due to the market's supply and demand.

The gold market has been rather quiet with a low number of transactions, according to Phu.

Explaining the price difference, he said that in the last two months, the global gold price had been cut by VND2 million per tael.

However, because most individuals and enterprises in Viet Nam bought gold bullions at much higher levels, they did not want to sell them as gold prices have dropped.

According to the Viet Nam Gold Association, domestic gold prices have not followed the global rate for a long time because the State Bank of Viet Nam has temporarily stopped the import of gold in an aim to reduce the trade deficit.

The domestic and global gold markets, which are not closely connected with each other, have also contributed to the differences in prices.

Most people have still maintained the habit of keeping gold to secure asset value, particularly during the prolonged economic turndown.

As a result, they continued to buy gold at the domestic rate, which was much higher than the global price, according to the association.

Association chairman Nguyen Thanh Long said the difference in the domestic and global gold prices varied based on the Government's administrative measures over the gold market, particularly its macro policies.

The import of gold will be only a temporary measure to stabilise the gold market and eliminate pricing differences, according to Phu of Doji Group.

He added that the central bank was capable enough of eliminating gold-pricing differences and did not have to use large amounts of foreign currency to import gold.

Phu suggested that the central bank cooperate with enterprises and commercial banks that hold large amounts of gold and have available distribution networks to ensure a sufficient supply of gold for the market.

He said that when gold supply on the market was ensured, then the market would become stable and the pricing gap would disappear.

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