Local gold market in a league of its own

Banking Academy of Vietnam’s Training Centre deputy director Nguyen Trong Tai forecast the gold metal price would continue upward momentum and the domestic and world market gap would further expand.

The state holds a monopoly in gold bar business, but the bullion price in the home market was still VND3 million per tael more expensive than in the global market. Why?

The State Bank controls the bullion market through Saigon Jewellery Company Limited (SJC), but in fact the gold market still witnesses large fluctuations.

Governing the gold market is a complex issue. In many countries gold must not have been taken as a sort of currency, but gold still holds an essential role particularly in time of economic slump. Thereby, further studies of effective gold market management methods are of paramount importance.

The gold price difference is partly from the quota-based gold import management scheme. Is that the case?

Governing gold import using quotas is a management tool. In my view, gold trading centres are where the gold supply and demand is most truly reflected. This should be acknowledged to intervene the market in an effective manner.

Gold trading centres exist in most countries as there people do not trade in physical gold.

The gap between domestic and world market gold price will narrow once these gold centres came into being.

In reality, illegal gold trading centres created a mess in the market, but banning the operation of these centres due to ill management practice would be unreasonable.

The existence of such centres reflects the demand for them is real. Thereby, further studies are needed to open these trading centres parallel to introducing better management and supervision mechanisms.

The bullion price hiked VND2 million ($95) per tael in the past two weeks. Why?

The home bullion market is largely driven by speculators, so that price fevers can easily take shape in case of big volatility. Therefore, in management it is important to avoid causing big changes creating room for speculators to cash in on.

In my view, the gold price will trend upward in the time forthcoming in conjunction with the world market. Easing currency moves in the US market could deflate confidence in the US dollar, providing impetus for the gold price to continue upward trend.