Officials face golden question

February 26, 2013 | 10:41
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Industry insiders are scratching their heads over the bullion market’s recent record price gap and how to ensure market stability in the long run.

Last week, the gap in domestic and world bullion market price hit a record VND5.5 million ($260) per tael which was held stable for several days due to scarce supply despite a nosedive in world gold prices.

A State Bank (SBV) executive attributed the gold market’s recent move to a lack of fresh supply.
Thereby, to alleviate tension commercial banks Dong A, Viet A, Sacombank and Techcombank were green-lighted by the SBV to temporarily export non-SJC gold for re-import of solid gold for casting SJC gold bars.

However, this was reportedly a stopgap solution and the SBV expected bullion market chaos would stop once the SBV directly got involved in gold market transactions slated from March, this year.

By that time, the SBV will do business directly with gold trading entities as well as fix transaction prices.
The central bank also makes interventions in case of gold market volatility to ensure shortening the gap in domestic and world gold market prices.  

However, the SBV’s deep intervention into gold market performances created different sentiments among the corporate community.

Vietnam Gold Business Association deputy chairman and general secretary Dinh Nho Bang assumed there was no country in which the central bank fixed the gold price and directly traded in the bullion market.

However, several experts supposed state participation was important since Vietnam’s bullion market was in conversion stage, so that it could be susceptible to vulnerabilities.

Doji chairman Do Minh Phu said state intervention into the gold market was a proper step to narrow the bullion market price gap.

Phu suggested keeping the domestic and world gold market price gap at around VND500,000-700,000 ($24-$33) per tael only.

About gold market development trend in 2013, Phu forecasted the yellow metal price would hold on growth momentum this year at a level similar to last year when it hiked about 9-10 per cent.

Dr. Nguyen Duc Thanh, director at National Economics University’s Vietnam Centre for Economic and Policy Research, assumed the big price gap between domestic and world gold market prices reflected low efficiency of gold market management policies, so shortening the price gap must be put at the forefront of attention to stabilise the market.

By Ha Tam

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