SJC bullion gold soared at the February 27 trading session to VND79.5 million per tael (selling price), just a little lower than the record high of VND80.3 million per tael on December 26, 2023.

The domestic gold price increased amid price decreases in the Asian market and the dong depreciation. 

At noon on February 27, the dong/dollar exchange rate quoted by Vietcombank was VND24,480 per dollar (buy) and VND24,820 (sell). These were the highest price levels since the beginning of the year, VND450-470 per dollar higher than early this year.

As such, the dong/dollar exchange rate nearly hit the historic peak of VND24,888 per dollar on October 25, 2022.

The gap between gold selling and buying prices has narrowed, but remains large, VND2 million per tael. SJC gold price is VND18 million per tael higher than the world’s price.

Analysts commented that the gap between domestic and international prices remains high, though the SJC gold price may go down because of the changes of policies. 

Right after the Tet holiday, Prime Minister Pham Minh Chinh requested the State Bank of Vietnam (SBV) to urgently review the implementation of Decree 24 released in 2012 on gold business activities, and propose solutions to control the gold market in the new conditions. 

The solutions need to be reported in the first quarter 2024.

In late 2023, the Prime Minister sent a telegram instructing SBV on the issue, and some experts thought that the monopoly in gold production may be removed.

However, the SJC gold price then decreased slightly for only 2-3 trading sessions before it bounced back. It and has been standing firmly since then, VND17-19 million per tael higher than the world’s price.

In general, gold price fluctuations won’t affect the national economy and people as heavily as the dong/dollar exchange fluctuations. 

The dollar appreciation, if it happens, affects the entire financial market and national economy. The exchange rate fluctuations impact macroeconomic stability, indirect investment capital flow in the stock market, and payment balance and domestic gold prices.

The dollar prices in the bank-to-bank market have soared recently, while the exchange rate has exceeded the VND25,000 per dollar threshold in the black market.

Vietnam dong in 2024

In fact, the dollar surpassed the threshold in mid-January and far exceeded the level last week. On February 27, the dollar price in the black market surged to VND25,250 per dollar (buy) and VND25,350 (sell), an increase of VND50 per dollar over the previous trading session. 

Meanwhile, the dollar was traded within the banking system at VND24,800-24,835 per dollar.

On the previous trading session, February 26, some commercial banks raised the selling price of the greenback to VND24,850 per dollar, or VND450 higher than earlier this year, which means an increase of 1.8 percent.

The official exchange rate quoted by SBV on February 27 was VND10 higher than previous days to VND24,014 per dollar. With the current trading band of 5 percent, commercial banks can quote dollar prices between VND22,813 and VND25,214 per dollar.

The dollar has shown signs of recovery over the last week, causing worries to investors.

However, experts believe these are just short-term fluctuations.

Nguyen Tri Hieu, a respected economist, believes that the dollar price may increase in the first half of the year, but would cool down later this year. The dollar would keep appreciating until the US FED announces the interest rate cut, and then stop increasing or decrease.

According to Hieu, the dong/dollar exchange rate performance would heavily depend on the US monetary policy and Vietnam’s export.

The appreciation of the dollar would put pressure on inflation and affect Vietnam’s foreign investment attraction. He believes that an appreciation of 3 percent would be reasonable.

Trung Hung, an experienced securities investor, said Vietnam’s policies are designed in a way to boost growth. Meanwhile, the US is yet to shift from a tightened to loosened monetary policy.

The Vietnam dong liquidity is still strong in the interbank market, while the overnight interest rate has been low, just 0.15-0.2 percent per annum, over many months. The interest rate rose to 4 percent per annum in recent sessions, but it has fallen again.

Manh Ha