Gold prices go wild amidst supply shortages
Over the past three weeks, the prices of SJC gold bars and gold rings have been continuously rising. Gold ring prices have adjusted more rapidly and in line with global trends, while SJC gold bar prices are influenced by the selling prices set by the State Bank of Vietnam.
Currently, the selling price for gold bars has hit a four-month high of VND89 million per tael, while the gold ring price is also moving close to an all-time high of VND89 million per tael. The State Bank has indicated that domestic gold prices are now only 5% to 7% higher than global prices.
As gold prices continue to rise without restraint, trading in the domestic gold market is facing significant challenges due to a general lack of supply. Many gold and gem stones shops have announced that they do not have gold bars available for sale, whilst the supply of gold rings is limited, with customers restricted to purchasing only two to three taels of gold rings per citizen identification card.
This level of scarcity has led to a surge in illegal gold trading activities in the black market, with the buying price for SJC gold bars being pushed up to VND91 million per tael. Similarly, the buying prices for some gold bar brands have also risen to VND89 million per tael.
The ongoing rise in gold prices combined with supply shortages has created volatility in the Vietnamese gold market, prompting a shift towards black market transactions as consumers seek to secure their gold amidst limited availability.
Expert insights on gold market volatility
According to Assoc. Prof. Dr. Tran Hoang Ngan, a National Assembly deputy, the gold market is currently experiencing significant and rapid fluctuations, with prices changing almost every second based on ongoing global economic and political developments.
“Over the past 40 years of monitoring international gold prices, I have noticed that gold prices tend to rise sharply during market shocks such as financial crises, currency crises, economic recessions, high inflation, wars, or forecasts that the US Federal Reserve will raise or lower interest rates, which causes immediate fluctuations in gold prices,” Ngan told VOV.VN.
At this time, he said, that investors, financial organisations, and individuals often choose to purchase gold as a hedge and to preserve capital.
“Central banks around the world are also ready to shift their foreign reserves from US dollars to gold in light of the many global uncertainties,” he analysed.
In his view, when investors perceive fewer prospects in investment channels, they tend to concentrate their investments in gold, and this sudden surge in demand causes prices to rise significantly.
“The continuous fluctuations in gold prices are a normal occurrence in today’s gold market,” he admitted.
To stabilise the gold market, the NA deputy proposed establishing a gold trading exchange to create a linkage between the domestic and global gold markets.
“This would help reduce the price disparity between domestic and international gold, as prices would be quoted in the US dollar, facilitating a connection. Establishing a gold exchange would also promote transparent and effective management of the gold market, aligning with global trends,” emphasised the deputy.
A dire need for gold market control
Ngan expressed a belief that gold is a unique commodity which executes the function of preserving and storing value, rather than merely being produced for jewelry. Vietnamese people have a strong risk-averse mindset, focusing on future security and high storage tendencies, which in turn drives their demand for owning, buying, and selling gold bullion.
“When gold is traded in the market with public order matching, it will enhance the transparency of buying and selling, as well as market demand. Transparent information allows participants in this market to make informed decisions, enabling the government to exercise better control. A gold trading exchange will create connectivity with the global market, allowing us to place buy and sell orders without the need for imports. This creates price balance with the global trading market,” explained the deputy.
Alongside the establishment of a gold trading exchange, the deputy also stressed the need for a legal framework specifically aimed at regulating the gold market, by placing a strong emphasis on information security to ensure smooth transactions in this market.
The State Bank of Vietnam has recently worked alongside relevant ministries, agencies, and localities to implement comprehensive measures to address the significant gold price discrepancies and to stabilise the gold market, contributing to macroeconomic stability.
The bank has instructed local branches to coordinate with relevant authorities to enhance the monitoring, inspection, and supervision of gold trading activities at a local level. Simultaneously, it has required credit institutions and licensed businesses dealing in gold bullion to strictly comply with legal regulations concerning gold trading activities by fully adhering to invoicing and documentation requirements as per legal stipulations.
The central bank has also requested that the Ministry of Public Security, the Ministry of Industry and Trade, and the Ministry of Finance move to strengthen inspection, supervision, and oversight according to their assigned functions and responsibilities, by taking strict action against illegal activities such as gold smuggling across borders, market manipulation, and profiteering, which all serve to destabilise the gold market.
