Gold bar monopoly

The last days of 2023 witnessed the domestic gold market surge, gold prices broke all-time records. The recorded price of SJC gold on December 26, 2023 exceeded 80 million VND/tael, and gold rings exceeded 64 million VND/tael. The gap between domestic and world gold prices is huge, especially SJC gold bars.

What caused the shocking increase in gold prices and what is the reason why domestic gold prices are "out of sync" with world gold prices at a very high level? Firstly, the increase in domestic gold prices is due to the increase in world gold prices. On December 26, 2023, the world gold price was trading around 2,076 USD/ounce, up 13% compared to the beginning of 2023. The domestic gold price as mentioned above exceeded 80 million VND/tael for gold bars and 64 million VND/tael for gold rings, up 20% compared to the beginning of 2023. The domestic SJC gold bar price is 20 million VND/tael more expensive than the world gold price.

According to some economic experts, the increase in gold prices is due to many fluctuations in the domestic financial market in the last months of 2023, many investment channels are facing difficulties. The stock market fluctuates erratically, the real estate market continues to freeze, the corporate bond market has not regained people's trust, bank deposit interest rates are at the lowest level ever, below the inflation rate... causing money to flow into gold - a "defensive" asset to ensure value.

Another reason why the price of SJC gold bars increased faster than the world gold price and had a large difference with the world gold price is due to the regulations in Decree 24/2012 on the management of gold trading activities. Two main points in Decree 24 have caused the price of gold bars to fluctuate strongly in recent times. First, the State has a monopoly on the production of gold bars, the export and import of raw gold to produce gold bars. The State Bank has chosen SJC as the national gold bar brand. Second, only credit institutions and enterprises licensed by the State Bank are allowed to organize the purchase and sale of gold bars.

The monopoly of SJC as the national gold brand has led to a lack of equality among businesses in the gold bar business. Many people have had to sell gold bars of other gold brands that they have held for a long time at a cheaper price than SJC gold even though the quality is the same. The gold bar monopoly policy has caused a shortage of supply, pushing up the market, causing disadvantages for consumers.

While people's demand is high, the supply of gold bars is limited, so the gap between domestic and international gold bar prices is widening, the gap between buying and selling prices is also widening, causing risks to be pushed onto buyers. In response to the unusual developments in the domestic gold market, the Prime Minister issued a telegram requesting the State Bank to urgently have effective solutions to manage and operate domestic gold bar prices according to market principles. Immediately, the domestic SJC gold price fell sharply.

Monopoly is not too strange to the Vietnamese people. The story of more than 20 years ago for mobile phone networks is a typical example. At that time, the whole country had 2 mobile network operators but they had the same owner. Mobile phone rates were very expensive, nearly 200,000 VND/month, only the "rich" dared to use them. A few years later, a series of mobile phone operators were born, creating a competitive market, causing mobile phone rates to drop sharply. If we compare postpaid mobile phone rates more than 20 years ago with the present time, they may be equivalent.

In the spirit of letting the private sector do what it can (except for special areas as prescribed), the State only plays a facilitating role, the Government needs to urgently amend Decree 24 so that the gold market operates according to market mechanisms, domestic gold prices are linked to world gold prices. It is necessary to end the monopoly of the SJC gold brand, creating a level playing field for qualified enterprises to produce and trade gold bars. The State Bank only plays the role of controlling gold age, gold weight... Returning gold bar trading activities to qualified enterprises. Commercial banks should only deploy derivative products such as certificates, bonds... related to gold.