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The gap between the SJC gold price and the world price of gold on Apr 3 stretched over VND 4 million per tael.
The selling price was also the floor price set by the central bank, and was as much as VND400,000 a tael higher than the quoted price of Saigon Jewelry Co at that time. It also contributed to widen the gap between local and global prices to some VND4 million a tael.
The State Bank of Vietnam organized the second auction of bullion gold on April 4 whit the same amount of 26,000 taels of gold will be up for bids with the reference price of VND43.61 million per tael, around VND 100,000 lower than prices on the market. (One tael equals 1.2 ounces).
Since March 28, when the first auction was held, domestic gold prices have been higher than world prices by VND 3 million per tael.
With news of the second auction on April 3, despite declining world prices, the Vietnamese market still saw an increase, which made the gap widen to 3.3-VND 4 million.
The first gold bullion bidden conducted by the State Bank of Vietnam on Thursday was not as successful as it had expected, with price settled at a high rate while gold traders blasted that the bidding only exacerbated the market instability.
Only 2,000 tael out of the 26,000 taels of gold bullion was sold during the bidding on March 28, the first official session under the bid of the central bank to intervene and stabilize the gold trading market.
The bidding thus not only failed to pull down domestic gold prices, but also created doubt in insiders over the main aim of the bidding, which is to stabilize the market.
Most gold traders deemed the first bidding as a big failure as pointed out by Tran Ngoc Tan, vice General Director of Nam A bank, “there are no banks in the world that monopolize gold importing, processing, and trading like the central bank”, he said.
“This multifunction has raised question over the central bank’s ability to evaluate the market,” he added.
The central bank should focus on its larger tasks like solving bad debts or restructuring the banking system, rather than trading gold bullion.
Meanwhile, the SBV has recently stipulated that credit institutions strictly abide by the regulations for managing gold trading.
Specifically, credit institutions are not allowed to convert gold deposits into Vietnamese dong or other forms of currency, nor can they use gold deposits for mortgages, collateral or security for the payment of loans from other credit institutions.
They are also not permitted to loan their customers money to buy gold unless they receive permission from the SBV governor.
Credit institutions must take back loans in gold or convert the outstanding loan into Vietnamese dong, and they cannot extend loans originally transacted in gold.