"Defects" of the gold market, who is responsible?

Need to catch the "disease" of the gold market correctly

The recent gold market developments have been assessed by experts as “one market” so the amendment of Decree 24/2012/ND-CP is receiving public attention. In particular, in recent times, domestic gold prices have increased faster or in the opposite direction compared to world gold prices. Actual records show that domestic gold prices have continuously reached peaks, the highest ever, the selling price of gold has reached the milestone of more than 80 million VND/tael.

Finance - Banking - — The recent gold market developments have been assessed by experts as "one market at a time".

To solve the situation of "dancing" gold prices, and to contribute to amending Decree 24/2012/ND-CP, many experts believe that in the management of the gold market, it is necessary to correctly diagnose the "disease" to have good solutions for the market, avoiding potential risks.

According to the State Bank, there is no longer an unstable gold market like in the previous period, and the “goldenization” situation is limited. Gold price fluctuations have little impact on the official exchange rate, the foreign exchange market and the domestic macro -economy . However, the difference between the price of SJC gold bars compared to other types of gold bars, 99.99% fine jewelry gold and international gold prices remains high.

The latest move from the State Bank - Proposing to change the gold bar production plan, removing the State monopoly on gold bar production, and granting gold bar production licenses to a number of qualified enterprises is considered by many experts to be necessary in the current context.

According to the State Bank, eliminating the State monopoly on gold bar production will be consistent with international experience, increase the supply of gold bars in the market, and solve the problem of price differences.

Sharing with the press about this issue, Deputy Governor of the State Bank Pham Thanh Ha said that among the synchronous solutions to manage the gold market according to Decree 24/2012/ND-CP on managing gold trading activities, the solution "State monopoly on production of gold bars, export of raw gold and import of raw gold to produce gold bars" is the most important to change the situation of the gold bar market after 12 years of implementation...

Regarding the issues mentioned above, recently, Senior Lieutenant General Luong Tam Quang - Deputy Minister of Public Security also said that the ministry has reported on this field. Right from the beginning of the year, the Ministry of Public Security has directed local police to deploy drastic measures to prevent gold smuggling across the border.

According to Deputy Minister Luong Tam Quang, Decree 24/2012/ND-CP of the Government on the management of gold trading activities has been implemented for more than 10 years. Currently, the gold market has many fluctuations and unstable developments, proving that Decree 24/2012/ND-CP has revealed shortcomings that need to be promptly amended and supplemented to suit the reality.

The representative of the Ministry of Public Security said that when amending this Decree, it is necessary to comprehensively assess the current role of gold reserves; re-evaluate the management of SJC gold bar production molds; research and propose the development of a market intervention mechanism; supplement regulations on the difference margin...

"The Ministry of Public Security will strictly implement the directions of the Government and Government leaders related to this field, especially Official Dispatch No. 23/CD-TTg just issued by the Prime Minister," Senior Lieutenant General Luong Tam Quang emphasized.

If there is monopoly and no competition, it will create "disabilities"

Previously, in the Official Dispatch No. 23/CD-TTg on strengthening measures to manage the gold market. The Prime Minister requested to continue to closely monitor the developments of world and domestic gold prices to promptly implement solutions according to regulations to stabilize the gold market. In addition, comprehensively evaluate, carefully analyze and have effective, timely, and regulated solutions according to market principles to immediately handle the situation of the high difference between domestic and international gold bar prices in recent times...

Giving his perspective, financial expert Nguyen Tri Hieu said that the State Bank's proposal to abolish the monopoly on gold bar production is completely appropriate to the current situation.

Dr. Nguyen Tri Hieu also believes that there needs to be other long-term measures for the gold market to develop stably. The abolition of the monopoly on gold bars is only a necessary condition. Along with the abolition of the monopoly on gold bar production, the State Bank also needs to allow businesses to import raw gold to increase supply and narrow the gap between buying and selling prices.

“If businesses are allowed to participate in gold bar production while the State Bank still has a monopoly on importing raw materials, the valve will still be closed and will not be enough to pull the domestic gold price closer to the world price,” Mr. Hieu commented.

In addition, the State Bank can also consider other solutions such as establishing a gold trading floor, from which people can buy and sell gold credits and limit the hoarding of physical gold. At that time, the domestic gold price will be able to connect with the world gold price, ending the current "one market" situation.

Sharing the same view, Dr. Le Dang Doanh - former Director of the Central Institute for Economic Management and Research - said that the gold market, like other areas of the economy, if monopolized and uncompetitive, will create "disabilities". Accordingly, the "disabilities" of the gold market are the high difference between buying and selling prices, and the difference with the world gold price.

“The State Bank’s change of mindset and proposal to abolish the monopoly on gold production and trading, although slow, is better than nothing. Only competition can help the gold market become dynamic. Gold trading enterprises “monitor” each other, contributing to the health of the market,” Mr. Doanh suggested.

Economist Ngo Tri Long acknowledged that the delay in abolishing the monopoly on gold production and import has caused many consequences. Typically, the high domestic gold price has led to gold smuggling, affecting the exchange rate, and the risk of foreign currency loss. Inequality in the business of gold enterprises, potentially leading to tax losses.

“In response to the Prime Minister’s determination, the State Bank has proposed to abolish the monopoly on gold bar production. If the State Bank soon abolishes the monopoly on gold production and trading, it will reduce negative consequences and have a better effect on the gold market,” Mr. Long stated his opinion.

Revolving around the story of the gold market, recently, at a meeting with the State Bank and ministries and branches on the implementation of tasks and solutions to manage the gold market, Deputy Prime Minister - Le Minh Khai also requested the State Bank to report on the situation of gold production and trading; find out the causes, thereby quickly having effective solutions in both the short and long term; ensure safe, healthy, effective, sustainable gold management, in accordance with the actual needs of the people, connected with related markets; avoid taking advantage of the situation to smuggle, speculate, manipulate the market, and trade gold against the law for personal gain.

“Diagnose the “disease” correctly to have timely and effective solutions to handle the current and future situation. In particular, it is necessary to comprehensively and thoroughly evaluate the current legal regulations, especially the contents related to Decree No. 24/2012/ND-CP…”, Deputy Prime Minister Le Minh Khai stated.

M.Vy (t/h)

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