Hanoi. The price of gold in Vietnam, following the global trend, has sky-rocketed to its 12-month peak, reaching over 47.40 million Vietnamese dong ($2,273) per tael (one tael equals to 1.2 ounces) over the weekend.
It is obvious that the price of gold in the global market that rose to $1,772.60 per ounce had pushed the price of gold in the domestic market, which has been the trend during the first two weeks of September.
However, the difference between domestic and global price of gold was still wide apart, at between 2.8-3 million VND (roughly $140-150) in favour of the domestic one.
According to Dr Nguyen Trong Tai from the Vietnam Banking Academy, gold price in Vietnam will continue to rise in the coming time, because it has to catch up with the price in the global market.
Local experts attributed the big gap between domestic and global gold prices to the ineffective measures to control the domestic gold market by the State Bank of Vietnam (SBV).
In February this year, SBV released Degree 24, upon which SBV will control the production and trading of gold bar, while commercial banks will be prohibited from mobilising gold and grant loans with gold.
However, the SBV extended the validity of Degree 24 from November 25, 2012, which provided elbow room for several commercial banks to continue mobilizing and trading gold bar, including the famous Asia Commercial Bank (ACB). The bank offers gold depositors with an interest rate of 0.8 per cent per year for the one, two and three-month terms, which will expire on November 25, and later the depositors would be issued with certificates to keep the gold without paying interest rates to the depositors.
This type of operations, to some extent, impacted on the domestic gold market.
In late August, SBV released two important decisions, one of which was for the SBV to have exclusive control and supervision in the production and management of gold bars in the country. It also selected the SJC-branded gold bars produced by the Saigon Jewelry Company as the national brand. These two SBV rulings pushed the price of SJC gold higher than those of other brands.
These rulings also pushed domestic gold price to rise by over 10 per cent within half a month, from 42 million VND ($2,014) per tael to over 47.40 million VND/tael.
The disparity in the price of gold in the domestic and global market of nearly 3 million VND (about $150) far surpassed the goal set by the SBV earlier this year at 400,000 VND (roughly $19) per tael.
Local experts suggested various solutions to control fluctuations of gold prices in Vietnam, one of which is to increase SBV's gold reserves so that it can intervene in case of market fluctuations.
Earlier this year, the SBV said that it has a plan to mobilize gold from individuals, which is believed to reach about 500 tons ( equals to $20 billion). However, according to a member of the national monetary-financial policy consultancy council, this plan may not be implemented by the end of this year as scheduled.
Some analysts said that the SBV should not mobilize gold from private individuals since it would be too risky due to the global gold price rising trend.
The reason for this is that the state bank has not yet fully controlled the operations of the commercial banks engaged in gold trading and it might revert part of its reserves in foreign currencies to gold.
In the meantime, the disparity between domestic and global gold prices will still be large due to the lack of a good connection between domestic and foreign gold investors.
Vietnam should soon open a gold exchange market with better management and supervision over the domestic gold trading, one banking expert said. (Xinhua)
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