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Gold purchases at this moment not advised
The Advisor to the World’s Gold Council in Vietnam Huynh Trung Khanh said that people should not buy gold at this moment as the domestic market is not following the same tune as the world’s market. The domestic price is VND1mil/tael higher than the world’s level.
The gold price in the world’s market has been stable, while domestic prices have increased periodically, and are now staying at high levels.
According to Khanh, gold businesses have turned 62 tonnes of gold into SJC gold so far this year, and some of this has been re-exported. Lacking capital, some commercial banks sold gold in stock when the world’s price soared to $900/oz. The Saigon Jewellery Company (SJC) launched onto the market 11mil taels of gold, which is now lying among people. A lot of investors have hoarded gold because they fear the VND may devaluate. As such, imported gold has been nearly sold out.
Statistics of the World’s Gold Council showed that in the first six months of the year, Vietnam consumed 56.8 tonnes of gold in kind, while the world consumed 177 tonnes.
The domestic price is now VND800,000-1mil/tael higher than the world’s market. It is because the State Bank ordered the halt of gold imports in June 2008 in order to help stabilise the foreign currency market. However, the decision has disconnected the domestic market from the world’s market. Last week, the world’s price unexpectedly dropped by $10/oz, bringing about price decreases on the domestic market. On August 12-14, SJC gold dropped to VND16.6mil/tael, while the purchasing power increased sharply. Enterprises took full advantage of the occasion, raising the gold price to VND17.2mil/tael.
Currently, people are not benefiting from the world’s gold price decreases. The Vietnam Gold Business Association is going to propose that the State Bank of Vietnam allow the import of several tonnes of gold in order to force domestic prices down more closely to the world’s levels. The imports will offset the exports enterprises made earlier.
The current conditions prove to be favourable for gold imports: the foreign currency market has been stabilised with a profuse supply of dollars. Imports of gold in small quantities for a couple of weeks would not influence foreign currency supply and demand. This would also help prevent illegal gold imports caused by the big gap between the domestic and world’s prices.
Khanh believes that 2-3 tonnes of gold imports would help domestic prices decrease sharply. If the gold supply does not increase in the time to come, enterprises will not slash sale prices, as they had to import gold at high prices before.
On August 19, SJC gold was sold at VND17.15mil/tael, while the world’s price hovered around $786-800/oz. On ACB gold trading floor, gold was traded at VND16.6mil/tael. As such, SJC gold on the domestic market was VND1.2mil/tael higher than the world’s level, while the gold on trading floor was VND800,000/tael higher.
In May 2008, the State Bank granted the additional quota of 3.5 tonnes of gold to five enterprises. The enterprises had to import gold at very high prices at that moment, at $850/oz.
VNN
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