Though the gap between domestic and global gold prices is significant, Governor of the State Bank of Vietnam (SBV) Nguyen Thi Hong said it is reasonable due to restricted supply.
At a recent meeting, Hong said according to the country’s policy to restrict gold supply sources with an aim to fight dollarisation and goldisation in the domestic economy, the SBV has not supplied gold for the domestic market since 2014 so jewellery producers have to use SJC gold bars as raw materials.
Due to the restricted supply and the sharp price hike of gold in the world market, domestic gold traders have to defend and reserve gold because they do not know how the world gold price will fluctuate, which pushes up the local gold price, according to the governor.
The governor also said the price gap between SJC gold bars and other types of gold bars is reasonable.
According to Hong, many gold enterprises have confirmed that no enterprise benefits from the price gap between SJC gold bars and other types. If people choose to buy SJC gold bars, which are more expensive than others, they can sell them at a higher price.
State management agencies have inspected and confirmed that no enterprise can manipulate SJC gold bars to benefit from the gap.
At the meeting, representatives of gold enterprises said the price gap was not desirable as the larger the gap is, the higher risk they face.
As for the scarcity of gold bars and gold raw materials in the local market, gold trading enterprises said it was because of an imbalance between gold supply and demand.
Le Thuy Hang, General Director of SJC Company, said the SJC gold bar brand had been selected by the Government and the SBV as the national gold brand since 2012. The production of SJC gold bars had been strictly managed by the SBV.
Hang affirmed her company was completely unprofitable from the gap between SJC gold bars and other types of gold bars. The company had fully complied with the SBV’s direction for the past ten years. SJC's net profit even decreased from more than VND300 billion yearly before 2012 to only VND74-80 billion currently.
For the gold price in the domestic market, SJC is not a manipulator because the price is determined by supply and demand of the market. All gold traders understand that no enterprise can manipulate the price, according to Hang.
According to Nguyen Thanh Long, chairman of the Vietnam Gold Traders Association (VGTA), the SBV should license qualified enterprises to import raw gold to produce jewellery.
Long said, currently, jewellery production enterprises were not allowed to import gold materials so they mainly have to buy in the market, which causes unstable local gold prices. The allowance will contribute to narrowing the gap between domestic and international gold prices.
Hong said the SBV would study carefully to encourage the development of the jewellery production industry with a fair competition.