A series of questions have been raised about the domestic gold price situation such as: How do the actions of the management agency affect the market? How should consumers "respond" to this development?
People buy and sell gold on Tran Nhan Tong street at noon on May 10. (Photo: Hoang Hieu/VNA)
After many consecutive sessions of strong increases, domestic gold prices have broken previous records. USD prices have also increased to the ceiling.
Faced with strong fluctuations, the State Bank was forced to intervene, notably by holding five gold bar auctions; two of which were successful, to increase market supply.
However, these efforts cannot immediately bring about an effective cooling of the market. There have been cases of people lining up to buy and sell gold.
A series of questions have been raised: How do the actions of the regulatory agencies affect the market? What other long-term measures are needed to reduce pressure on the gold market and exchange rates in the future? How should consumers “respond” to this development?
Regarding the above issue, VNA reporter had an interview with Economic Expert Dr. Vu Dinh Anh.
- Sir, the price of gold has been increasing rapidly recently. The State Bank has immediately taken measures to intervene. How do you assess the impact of this move on the market?
Dr. Vu Dinh Anh: Right after the hot gold price increases, the State Bank decided to re-organize the gold bar auction from April 22. However, out of the 5 auctions held, only 2 were successful with the winning gold volume of 3,400 taels for each auction.
Although the winning bid volume is not much, this move also sends a signal about the beginning of restoring the supply channel of SJC gold to the market. This will have the first impact on gold prices, narrowing the gap between supply and demand, helping to re-establish the distribution channel to stabilize the gold market.
More importantly, when the domestic gold price, including SJC gold and ring gold, compared to the international gold price is up to millions, sometimes even up to over 10 million VND/tael, the bidding will help to handle the huge difference as above.
An equally important factor is that through this move, the State Bank has officially announced that it will intervene in the gold market, not allowing violations of market principles as in the past.
Many people queue up to wait their turn to buy and sell gold at Bao Tin Minh Chau store. (Photo: Hoang Hieu/VNA)
- Increasing the supply of gold bars through gold auctions is expected to help cool down the gold market. However, there are also concerns that this could put pressure on the exchange rate. What is your opinion on this issue?
Dr. Vu Dinh Anh: I understand that the 16,800 taels of gold that the State Bank put up for auction this time is not the new amount of SJC gold, but the amount of gold available in the warehouse. Thus, we do not have to spend foreign currency to import gold, stamp gold bars to organize the auction.
In addition, if we want to regulate the gold market, especially SJC gold, it is clear that we still have to use foreign currency to import gold to meet domestic demand and this is normal.
Currently, Vietnam has a very large trade surplus, the balance of payments, although there are risk factors, is still quite positive. And another important point is that the world as well as in Vietnam, people always consider gold as a component of foreign exchange reserves and even the liquidity of gold as well as the stable value of gold in many cases is much more stable than foreign currencies and other valuable papers.
Therefore, I think that using foreign currency to import gold to balance the market is completely normal in theory, practice and market characteristics.
Furthermore, we currently have a monopoly on SJC gold bars. The full authority to import gold to produce SJC gold bars or even import gold into Vietnam for use as jewelry is still under the management of the State Bank.
Thus, in balancing the management of both foreign exchange and gold, the State Bank has full authority to handle this for the benefit of both the economy and society.
- What is your forecast for fluctuations in the gold and foreign currency markets in the coming time?
Dr. Vu Dinh Anh: Vietnam's gold market and exchange rate are under some great pressure. Firstly, the US Federal Reserve's hesitation to lower interest rates or not in the context of high inflation could cause the USD to appreciate against many other currencies, including the Vietnamese Dong. Pressure on Vietnam's exchange rate will continue to increase accordingly.
Second, while the US, European countries and many other developed economies have continuously increased interest rates in recent years and tightened monetary policy, in Vietnam, interest rates have only increased twice in 2022, then decreased four times in 2023.
This also causes the Vietnamese Dong to depreciate against key currencies, including the USD. Third, central banks of countries, especially some of the world's leading economies, are continuing to change the structure of foreign exchange reserves, instead of holding valuable papers or strong foreign currencies, they hold gold reserves.
Gold demand therefore continues to increase, making gold investment channels more attractive, and gold prices will increase.
- In your opinion, what needs to be done to reduce pressure and avoid shocks to the gold and foreign exchange markets in the long term?
Dr. Vu Dinh Anh: First, we have successfully organized two gold auctions to provide additional gold supply to balance supply and demand.
In addition, it is possible to organize regular and continuous gold auctions, which can directly impact the price of SJC gold and thereby impact the price of 9999 gold rings, even impacting the supply of raw gold used to produce gold jewelry.
For exchange rates, early forecasting is needed to respond promptly to interest rate policy decisions of major central banks around the world.
We can also directly intervene in the exchange rate by selling foreign currency. Currently, Vietnam's foreign exchange reserves are around 100 billion USD and so we have a very good tool to intervene in the market.
Not to mention the factors of trade balance, capital balance or balance of payments are still within a certain extent, there are positive factors.
In addition, the exchange rate policy needs to be reviewed and re-evaluated in terms of the impact of the exchange rate on economic growth, trade and investment activities, and on channels to attract both direct and indirect foreign investors to Vietnam. Based on that, timely and appropriate intervention measures will be taken.
- What advice do you have for investors and people in the context of the market still having many unpredictable fluctuations?
Dr. Vu Dinh Anh: For professional investors who are familiar with the market, it can be affirmed that the recent "waves" of gold and exchange rates are an investment opportunity. In the coming time, they can continue to take advantage of the following fluctuations to increase the profitability of the assets they are holding.
However, for non-professional investors or those who only buy gold or foreign currency to accumulate, my advice is to be very careful and consider carefully to avoid falling into the trap of "buying high and selling low".
As for those who have a real need for foreign currency to pay, solve business problems or buy gold for daily needs such as weddings, gifts..., they can take advantage of short waves, when gold prices and exchange rates temporarily cool down to buy.
For example, on April 23, when the State Bank announced that it would auction gold bars, the price of gold immediately dropped by several million per tael. Or as for foreign currencies, in recent sessions, the State Bank has not adjusted the central exchange rate upward.
This is a signal that the State Bank is willing to accept selling foreign currency to stabilize the exchange rate. So those who really want to buy can observe the information and make decisions at the right time.
Thank you very much!
According to VNA
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