State Bank strives for stable gold market

Head of the bank’s Forex Management Department Nguyen Quang Huy announced that to stabilise the market, gold bidding sessions would resume for now.

Before the suspension, the SBV started selling gold in March with the purpose of settling the market, was it effective?

The domestic gold market in early 2012 was unstable and firms could not import gold and the SBV was not importing or lending either. This led to scarce domestic supply, which is what led to the central bank opening gold bidding sessions on March 28 to help credit institutions’ gold positions as well as individual demand.

These sessions were successful, particularly as they were held by the state bank, which made the gold trading official and transparent. The extra money made by the SBV at the sessions went toward the state budget. Most of all, the sessions were effective in closing the gap between domestic and global market prices.

How were the profits from these sessions used?

The government is clear on the amounts owed to the budget by the SBV, and payments are made quarterly. The bank deducts expenses and gives the rest to the state budget. If the state budget needs more, the government will adjust the amount and the central bank will use operations such as its gold bidding sessions to help raise that capital. The sessions were part of this process.

While the state bank’s move helped stabilise the market, it also triggered a growing concern about Vietnam’s reliance on gold. What are your thoughts on this?

There are two channels that are of concern, the first is credit institutions and the other is people. The first is not a concern, as banks have been banned from mobilising capital and lending in gold. Though in terms of people, they this is much more difficult, as they have the intrinsic right to buy and keep gold. While we can’t block them from this, we can encourage them to choose other investment options. We need to work now on strengthening the dong currency and increasing the attractiveness of other investment channels. This will take time, though demand for gold has gone down considerably recently.

How will gold sessions look in the near future?

The goal of these sessions is stabilising the market, and when it reaches stability the state bank will reevaluate and adjust according to the market. The number of bidding sessions and amounts of gold sold are already falling due to reduced buying power.

Should the SBV mull a price cap on gold bars from successful bidders?

At the first session, we did set our bid price higher to limit speculation, but in the following sessions, the bid price has been set near market price. We can’t cap the sale price as this is against the law and would not be effective toward our overall goals.