Gold selling solution

After 1 week, the State Bank sold SJC gold to 4 state-owned commercial banks and Saigon Jewelry Company Limited - SJC (SJC Company) to sell to people, the domestic gold price decreased sharply. Compared to the peak of 92.4 million VND/tael set on May 10, by the afternoon of June 9, the domestic SJC gold price decreased by about 15.5 million VND/tael. The gap between the domestic gold price and the world gold price after conversion is only about 4 million VND/tael higher. Why did the domestic gold price decrease sharply while the world gold price did not fluctuate much?

Recently, the converted price of domestic SJC gold bars has always been higher than the world price, at times reaching up to 20 million VND/tael. The reason is that people's demand for gold is very high while supply is limited. Since the first half of 2023, deposit interest rates have dropped sharply and continued to remain at a very low level, which has not attracted depositors. The exchange rate between VND/USD has continuously increased. Since the beginning of the year, VND has depreciated by 4.8% compared to USD. Investment channels such as bonds, stocks, fund certificates, real estate, etc. are not a "playground" for everyone, especially middle-aged and elderly people. Therefore, many people tend to withdraw savings to buy gold to preserve their assets.

Another reason why domestic gold prices are higher than world prices is Decree 24/2012 on the management of gold trading activities. Accordingly, the State Bank has a monopoly on the production of gold bars, the export and import of raw gold to produce gold bars and chooses SJC as the national gold bar brand. The gold bar monopoly policy causes a shortage of supply, causing the domestic gold market to increase higher than world prices, causing disadvantages for consumers.

Before the State Bank took unprecedented action to sell gold to stabilize prices for the people, this unit organized many gold auctions to reduce the gap between domestic and world gold prices but was unsuccessful. This gap even increased, leading to complicated gold smuggling. Subjects collected foreign currency from the free market to smuggle gold across the border into Vietnam, causing the VND/USD exchange rate on the black market to increase very high, putting pressure on the exchange rate management of the State Bank. The State Bank's sale of SJC gold to a number of commercial banks and SJC Company to sell to people at the regulated price was considered a "strong medicine" to bring the domestic gold price closer to the world gold price, prevent gold smuggling, and reduce pressure on the VND/USD exchange rate.

However, some experts question whether the State Bank has enough SJC gold to sell to the people because after a week of selling gold to stabilize the price, people's demand is still very high? Many people lined up all day at gold selling points but could only buy small amounts, not as expected. According to some economic experts, this measure of the State Bank is only a temporary solution because if it continues to supply physical gold to the people as it is now, it will lead to "goldenization" of the economy, creating a mentality of gold speculation. Resources from the people are not focused on production and business but flow into gold.

For the gold market to operate stably, the State Bank needs to soon submit to the Government amendments to Decree 24/2012 on the management of gold trading activities. Research on issuing gold certificates to sell to people instead of selling physical gold as is currently the case.