Hair-raising gold, dollar trading returns to normal

After a sharp two-week spike, gold fell by the end of last week to VND7.7 million ($497) per tael, down VND250,000 ($16) from its peak price and VND110,000 ($7) lower than world prices.
The greenback slipped on the street from a high of VND16,100 to VND15,720 last Friday, equal to the official exchange rate at commercial banks.
The central bank has come in for praise for its timely intervention in the market, touted as the main reason for the return of stability.
Last week, it released dollars for importing two tonnes of the eight-tonne gold quota, increasing in one stroke the supply of both commodities.
Besides this, State Bank governor Le Duc Thuy announced that the dong would not be allowed to fluctuate more than 2 per cent this year.
This allayed the anxiety of potential depositers who had the soaring inflation of two decades ago still fresh in their memory.
The fears of inflation and devaluation were triggered after the State Bank announced the introduction of high-denomination currency notes.
“It was not very wise of the bank to choose this time of the year to launch the new notes, especially of higher denomination,” said To Dong Vu, who visits Saigon Jewellry Company (SJC) gold shops almost everyday to keep a tab on prices.
Nguyen Long, deputy director of SJC, the country’s biggest gold trader, agreed that the decision to allow gold imports had helped to increase supply.
It also hit smuggling in the precious metal and helped bring down the street price of the dollar as gold is always denominated in dollars.
In a meeting with the press shortly before the announcement of the new notes’ introduction, Thuy said the notes would barely cause a ripple.
Things panned out differently.
Despite recovering quickly, the central bank may have failed to anticipate the reaction the notes would cause.
Meanwhile, gold prices on the world market hit their highest mark in almost eight years last Thursday, with a spot price of $408.35 an ounce.
Experts are forecasting it will soon exceed $410 with European countries considering an extension of their gold pact among central banks.
Under the pact, 15 members of the union are allowed to trade a maximum 2,000 tonnes of gold during 1999-2004.