In the past 2 weeks, the price of gold has continuously fluctuated strongly. There was a time when SJC gold bars were listed by "gold shops" at a selling price of 80 million VND/tael.
However, on December 28, the Prime Minister issued a "hot" directive on gold and the State Bank also spoke out about being ready to intervene to stabilize the market. By the morning of December 29, the price of SJC gold bars continued to fall. The selling price had reached 74 million VND/tael, down about 6.5 million VND compared to the peak.
By noon on December 30, the price even dropped to 72.5 million VND/tael for selling, while the buying price dropped to 69.5 million VND, down nearly 8 million VND compared to the peak set on December 26.
2 factors causing gold prices to fall sharply
Sharing with Dan Tri reporter, Associate Professor Dr. Nguyen Huu Huan, lecturer at Ho Chi Minh City University of Economics, commented that the Prime Minister's request for the State Bank to stabilize the gold market will have an immediate impact on the psychology of gold investors in recent times.
Accordingly, investors are waiting for the price to continue to increase, after the Prime Minister's directive, they will sell to "take profit" because they think the gold price will decrease sharply when the State Bank intervenes in the market.
In addition, many investors have the mentality of selling to "take profit" when holding gold for many years. 4 years ago, the price of SJC gold bars was listed by businesses at around 40-42 million VND/tael.
Despite the strong price fluctuations, many people still came to buy and sell gold on the afternoon of December 28 (Photo: Manh Quan).
Sharing the same view, expert Phan Dung Khanh said that the sharp drop in gold prices could come from two factors. The first is the psychology of gold holders being affected by the Prime Minister's directive. The second comes from the psychology of taking profits when gold prices are high and fear of sharp drops in gold prices.
Following the Prime Minister's direction and the State Bank's actions, the gold market will be more stable, and the gap between domestic and international gold prices will be narrowed.
Mr. Khanh said that the price of SJC gold fluctuates without any rules, generally following the movements of world gold prices. SJC is a national gold brand, when the gold market goes down, the price of SJC gold also goes down but the difference is small, and vice versa.
State Bank intervenes to stabilize, what will happen to gold price?
According to Mr. Huan, many years ago, the State Bank also intervened to stabilize the gold market. Gold prices remained stable for many years without any fluctuations. Until recent years, the monetary authority did not intervene in the gold market but let the market operate on its own.
In case the monetary authority intervenes in the gold market under the Prime Minister's direction, it is highly likely that gold prices will decrease in the coming time, and it is unlikely that they will increase further.
The difference between domestic and international gold prices may decrease to around 3-4 million VND (Photo: Manh Quan).
The trend of domestic gold prices can only decrease to approach the world gold price. This will affect the psychology of investors, causing them to sell gold before the price of gold drops sharply.
"If it is only due to psychological factors, the gold price will only decrease by a few million VND. But if there is intervention to stabilize the gold market, not allowing the difference between domestic and international gold prices to become too large, the price difference could decrease to around 3-4 million VND, meaning the gold price could decrease by about 10 million VND/tael," Mr. Huan predicted.
"The monopoly on gold bars should be stopped"
Mr. Nguyen Huu Huan commented that domestic gold prices are not connected to international prices, and have been "a market unto themselves" for many years, leading to extremely unexpected and unpredictable fluctuations.
He said that there was a phenomenon of gold price control. Specifically, domestic gold prices sometimes increased in line with world prices, but when international prices decreased, domestic prices decreased slowly or did not decrease at all.
"It is worth mentioning that this only happens with SJC gold bars, but other types of gold such as rings and jewelry are still normal," the expert commented.
SJC gold bars have had a monopoly on the market for many years, leading to price control (Photo: Thanh Dong).
He said that SJC gold bars have been monopolized for decades. For more than 10 years, the market has not had any more SJC gold bars. Therefore, the units that hold the amount of gold in the market can control the price. As for gold rings, the supply is abundant due to more suppliers, so the price will also fluctuate according to the world price and be more competitive.
To stabilize the gold price, Mr. Huan said that the only way to intervene in the market at this time is to stop the monopoly of gold bars. The State only controls the supply, while production can be allowed for other businesses to participate, using residential gold to produce gold bars, contributing to stabilizing the market's demand for gold bars.
Although market competition will benefit consumers, import restrictions should still be maintained to ensure monetary security and reduce hoarding.
According to the expert, the balance of payments has been quite stable in recent years. If gold has to be imported, a large amount of foreign currency will be lost, while the trade surplus and foreign exchange reserves are not high.
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