Increase gold supply and narrow the gap with world gold prices

Economic experts said that if imports increase gold supply, the gold price will narrow the gap with the world gold price and will not affect the country’s foreign exchange reserves. Mr. Nguyen The Hung, an expert from the Vietnam Gold Business Association, recently analyzed in a media interview that if the State Bank of Vietnam cancels its monopoly on SJC gold bars, other types of gold bars from other brands will be supplied to the State Bank of Vietnam. The market supply is reduced and the supply is sufficient. The difference from the international price is about 1-2 million VND/tael. The difference between the buying and selling price has narrowed to 500,000-1 million VND/tael (currently 3 million VND/tael). By then, the price of SJC gold bars will only be around VND64-65 million/tael.

In addition, there is a huge demand for gold, not only for SJC gold bars, but also for gold jewelry. The National Bank should abandon the conditional gold jewelry business so that more companies can easily participate in the market. Accordingly, people have more choices for gold.

Some economic experts say that the National Bank has not produced more SJC gold bars to supply the market since 2014. At the same time, people have a mentality of hoarding gold, making this commodity more scarce, pushing up prices, and widening the gap with world gold prices.

In addition, due to the scarcity of raw gold, merchants are using SJC gold to make gold jewelry to meet people’s needs, so the gap is getting bigger and bigger. As before 2020, SJC gold prices are comparable to jewelry gold and world gold, and sometimes even lower. But due to scarcity, the price of SJC gold has been pushed further and further away from world gold and jewelry gold.

In order to solve this problem, experts believe that the National Bank should consider formulating plans to import and restart gold bar production to increase market supply and narrow the price difference between SJC brand gold and world gold. Some people believe that this will affect the country’s foreign exchange reserves. However, according to economic experts, this issue is not a real concern.

Because according to data from the Ho Chi Minh City Jewelry Association (SJA), from 1991 to 2012, Vietnam imported more than 1,000 tons of gold (an average of about 45-50 tons per year). If Vietnam continues to import at this volume, it will cost about US$3 billion per year, accounting for only 3% of Vietnam’s foreign exchange reserves by 2023.

According to the International Monetary Fund (IMF), although the world gold price has only increased approximately 5.4 times in the past 28 years (from 1995 to 2023), from US$387/ounce in 1995 to US$2,078.4/ounce in 2023, But Vietnam’s foreign exchange reserves will increase 75.5 times, from US$1.32 billion in 1995 to US$100 billion in 2023. Therefore, if gold imports are controlled, it will not have much impact on the country’s foreign exchange reserves.

>> Simple way for SJC gold prices to be tied to the world, even though it remains a monopoly