VietNamNet Bridge – The local gold market has seen strong fluctuations in 2013 given the strong price decline on the world market and new policies on gold market management released by the central bank.

Gold prices tumble

Local and international gold prices have tumbled by 25% over the past year after rising steadily in the previous five years.

Consumers buy gold jewelries at a shop of Phu Nhuan Jewelry Company in HCM City.

Due to positive developments of the world economy, investors do not consider gold as a safe investment channel. Gold investment funds worldwide have strongly reduced their holdings, sending prices of the precious metal down continuously.

On the European market, the price of gold stood at US$1,206 an ounce on Monday.

Earlier this year, large financial institutions predicted the gold price to hit US$2,000 an ounce by late 2013. However, gold prices have averaged out at only US$1,350 per ounce this year.

In the local market, the gold price slid from VND46.53 million in late 2012 to VND34.92 million per tael on Monday, the lowest level over the past three years.

Central bank’s gold sales hit 68 tons

In 2013, the central bank for the first time launched gold auctions to help banks balance gold positions after these credit institutions had sold gold to the market in previous years. Given the Decree 24/2012/NDCP on gold market management, banks are not allowed to import the precious metal and only the central bank is permitted to carry out gold exports and imports.

Aside from around 30 tons sold to banks to help them settle gold arrears and close gold accounts, the remaining gold volume has been launched onto the market to serve people’s demands.

Before 2008, gold imports were modest and conducted by enterprises. However, gold smuggling was active with the smuggled volume estimated at equal or bigger than that of the amount imported through official channels.

Goldenization fall

As banks have neither mobilized gold deposits nor provided gold credits while the number of gold trading points has declined, the people have reduced gold holdings, shifting to securities, bank deposits or production and business. In addition, as gold processing has been put under supervision of the central bank, gold smuggled into the country is not made into gold bars.

The foreign exchange rate has been stable partly because foreign currency demand for gold smuggling has also sharply declined. Impacts of gold price hikes on inflation and other goods have also minimized.

Gold market sluggish

Saigon Jewelry Company (SJC) has seen sales slumping by 60% against the previous year while Phu Nhuan Jewelry Company (PNJ) has also reported daily sales of around 300 to 400 taels compared to 700 to 800 taels in 2012.

The steady decline of gold prices and the wide gap between local and international gold prices has made the precious metal less attractive to investors.

Gold firms change strategies

SJC, which holds a market share of over 90% at home, has shifted to gold bar and jewelry trading instead of gold bar production and trading like before. The central bank has become the monopolistic gold bar producer in the country given the Decree 24.

Many enterprises have also given up gold bar trading, resulting in a strong revenue decline in 2013.

Source: SGT