Banks sell gold directly to people

At the end of May 29, the price of SJC gold bars suddenly dropped sharply by VND600,000 - at VND88.3 million/tael for buying, VND90.3 million/tael for selling - after the State Bank of Vietnam (SBV) announced that from the beginning of next week, it will sell gold bars to four commercial banks including Agribank, BIDV, Vietcombank and VietinBank. From there, these banks will directly sell gold to customers in need across the country.

Will sell based on world price?

Mr. Pham Quang Dung, Deputy Governor of the State Bank of Vietnam, said that the selling price of gold will be determined by the State Bank based on world prices.

According to Mr. Dung, this is the next step of the State Bank after the gold bar auction plan to increase supply to the market did not achieve the expected target. Over the past month, this agency has organized 9 auctions but the difference between the price of SJC gold bars and the world gold price is still high, about 20%.

"This shows that in addition to market factors such as supply and demand, the possibility of illegal acts, manipulation, price fixing, and destabilization of the gold market cannot be ruled out," the Deputy Governor explained.

Deputy Governor Pham Quang Dung also affirmed that with abundant resources and existing tools, the State Bank has the capacity and determination to stabilize the market and achieve the goal of narrowing the gap between domestic and world gold prices in a sustainable manner.

"Given the complicated developments in domestic and international gold prices, people need to be very cautious when participating in gold transactions to minimize risks," Mr. Dung advised.

The State Bank will directly sell gold bars to four state-owned commercial banks instead of organizing an auction as in the past. Photo: LAM GIANG

Speaking to reporters of the Lao Dong Newspaper, leaders of BIDV, Agribank, and VietinBank said that their branches and transaction offices across the country have prepared the necessary conditions to buy gold from the State Bank and then resell it to the people. Vietcombank is in the process of completing its documents so it will take action when it is granted a license to trade in gold bars by the State Bank.

Gold expert Nguyen Ngoc Trong assessed that the solution for state-owned commercial banks to sell gold to people through a network of transaction offices and branches across the country is a very strong move by the State Bank. This shows the determination to pull down the price of SJC gold bars and narrow the gap with the world gold price. Importantly, this solution will contribute to changing the psychology of the gold market.

"In fact, on the afternoon of May 29, after the State Bank announced a new stabilization solution, the price of SJC gold bars decreased by more than half a million VND/tael. The advantage of the commercial banking system is its large and nationwide network. The State Bank's new gold market stabilization plan will dispel the market's mentality of "SJC gold prices only increase in one direction", when the gold supply and demand are met with a large network and scale" - Mr. Trong commented.

Do people buy or sell?

One thing that the public is interested in after the State Bank announced the new stabilization plan is at what price the State Bank will sell gold to 4 commercial banks so as not to incur losses? Will people and investors go to banks to buy and sell gold instead of contacting gold businesses as before?

The owner of a gold business in Ho Chi Minh City expressed his opinion that if the State Bank of Vietnam sells gold to commercial banks at a price 1-2 million VND/tael higher than the world price; and at the same time stipulates that commercial banks sell to customers at a price no higher than 1-2 million VND/tael compared to the price purchased from the State Bank of Vietnam, the price of SJC gold on the market could decrease sharply, narrowing the gap with the world gold price.

A member of the Vietnam Gold Trading Association (VGTA) hypothesized that people who bought gold at high prices may not sell because they think the State Bank cannot sell gold on the market for a long time. At that time, the domestic gold price will increase again. If people rush to buy SJC gold bars, the State Bank will be forced to import gold in large quantities to meet market demand. At that time, foreign currency reserves will be depleted, affecting the VND/USD exchange rate, affecting the macro economy.

Therefore, members of VGTA continue to propose that the State Bank advise the Government to soon amend Decree 24 in the direction of removing the monopoly on production and brand of SJC gold bars. Instead, focus on the production and trading of gold rings and jewelry. The State Bank remains the importer of raw gold and bids for raw gold for businesses to produce gold jewelry and fine art, serving the needs of consumers.

From another perspective, Mr. Nguyen Ngoc Trong said that the recent rapid increase in the price of SJC gold bars was not only due to the impact of world prices but more importantly, due to the market's expectation that the price of SJC gold would only increase in one direction. This mentality caused people and investors to only buy and not sell.

"If the solution is to let state-owned commercial banks sell gold to achieve the goal of narrowing the price gap and effectively combating gold-ization, the market will have buying and selling transactions as before. In the past, in 2019, the world gold price was higher than the SJC gold price. When buying SJC gold has higher risks, plus the profit rate from the increase in gold price is no longer guaranteed, the gold fever will cool down" - Mr. Trong said.

Strictly handle businesses that violate the law

The State Bank of Vietnam said that it is coordinating with the Ministry of Public Security, the Ministry of Finance, the Ministry of Industry and Trade and the Government Inspectorate to inspect the implementation of policies and laws in gold trading activities of credit institutions and enterprises, and resolutely and strictly handle violations of the law (if any).

Source: https://nld.com.vn/ngan-hang-truc-tiep-ban-vang-cho-nguoi-dan-196240529214047072.htm