A representative of a gold trading company takes part in the auction on Thursday. The domestic gold price went up as the global gold price fell yesterday. — VNA/VNS Photo
In an attempt to reduce the gold price, on Thursday the central bank organised an official gold auction with a total of 26,000 taels put on sale, twenty-one registered members took part.
They were surprised as the central bank announced the floor price for the auction as VND43.81 million ($2,086) per tael, high compared with the market price of VND43.37 million per tael. At the same time, the global price fell by $3 to $1,602 per ounce.
The result was that the auction drew only two buyers, Asia Commercial Bank (ACB) and Phu Quy Gold Investment. They purchased a total of 2,000 taels.
Immediately after the auction, domestic gold prices on gold bars on the market surged strongly.
The price of SJC gold bars on the market jumped sharply, from VND43.37 million to VND43.55 million, and then to VND43.7 million and VND43.85 million per tael late in the day.
This price was VND300,000 to VND320,000 higher than the opening price of gold traders, and VND250,000 higher than the central bank's reference on Wednesday.
Yesterday morning, the selling and buying prices of SJC gold in HCM City were still at VND43.65 and VND43.83 million per tael, respectively. A representative of an enterprise in Ha Noi which participated in the auction said the central bank's gold prices for the auction were established at a level higher than the market price. So, it was not suitable to most of participants' expectations. As a result, only a few of them could accept.
The central bank's high prices for the gold bar auction helped increase the purchasing power on the market because many people were afraid that the gold price would continue to increase.
This has caused the domestic rate to increase sharply, thus widening the gap between the global and domestic price, from VND2.6 million per tael to VND3.2 million, he said.
Another auction participant in HCM City said that he came to the auction hoping the central bank would offer a floor price lower than the market rate to increase supplies to the market.
"The auction price disappointed me, so I had to return home with empty hands," he said, adding that "those who bought gold bars at the auction were in great need of bullion."
An official of the central bank, who declined to be named, said the central bank's gold auction was not aimed at stabilising the gold prices or immediately making the domestic gold prices closer to the global market.
Instead, the bank wanted to provide supplies of gold bullion for the domestic market. "The stabilisation of the gold market is so complicated that it cannot be solved after a few auctions," he said.
"In addition, both the global and domestic gold prices cannot be anticipated accurately, so the central bank would have to cope with high risks, as participating in directing trading gold bars on the market, particularly with gold from the national reserves. So, its gold price for the auction must be calculated in ways to ensure safety for the foreign exchange reserve," he said.
The difference in the global and domestic gold prices will only end when gold trading is done via accounts, according to the official.
However, that trading model is risky, so the central bank's immediate goal is to ensure supplies in order to stabilise the market.