Increasing supply helps ease pressure on gold market

With the newly promulgated Decree 232 that amends and supplements some articles of Decree 24 on gold trading management, the gold market will welcome multiple gold bar brands, ending the monopoly of SJC. Eligible enterprises and commercial banks will also be licensed to produce gold bars.

Le Xuan Nghia, former Vice Chair of the National Financial Supervisory Commission, said these changes will enhance market transparency, boost gold supply, reduce cross-border smuggling, and help the central bank manage foreign currency flows from gold exports.

More importantly, ending the gold bar monopoly will narrow the unreasonable price gap between domestic and global markets.

“Domestic gold prices will soon decline. Commercial banks, familiar with daily international dollar transactions, can conduct gold import and export efficiently. The key issue is how quickly the State Bank grants licenses,” Nghia said.

With the requirement for commercial banks to have a minimum charter capital of VND50 trillion, 5-6 banks, along with gold trading enterprises, will be eligible to import and export gold. 

So, a physical gold exchange could be established to auction and certify gold in accordance with international standards, helping domestic gold prices closely track global movements.

“The gold exchange will hold wholesale auctions, and these institutions will then distribute to retail jewelry shops. As a result, pricing will be more transparent, forming a seamless market from import to retail. At the same time, monetary and tax management will benefit significantly if a gold exchange is set up,” Nghia analyzed.

“A gold exchange would auction bulk purchases, which would then be distributed to retail gold shops. This ensures transparent pricing, creating a seamless gold market from import to retail. It would also facilitate monetary and tax management if a gold exchange is established,” Nghia commented.

Gold expert Tran Duy Phuong noted that domestic SJC gold prices have surged and detached from global prices due to supply shortages. For about a year, the State Bank has not sold SJC gold to stabilize the market to the Big 4 banks and SJC Company.

Meanwhile, gold demand remains high, and this supply-demand imbalance has driven prices to record highs.

In this context, Phuong said Decree 232, by abolishing the SJC gold bar monopoly, opens opportunities for new gold bar brands. Qualified banks and enterprises can produce gold bars, increasing choices and fostering competition.

Though SJC gold accounts for 80 percent market share and consumer habits are hard to change quickly, new brands will create competition and offer more options for buyers.

“More importantly, Decree 232 allows raw gold imports for enterprises to produce gold bars. This enables SJC and others to balance supply and demand, apply for import licenses, and produce gold bars for the market,” Phuong assessed.

When will gold prices drop to VND100 million/tael?

“When supply improves, the shortage eases, the market’s gold fever will cool, and the domestic-international price gap, currently at VND18-19 million per tael, will shrink,” Phuong said.

However, he noted that the market will not adjust overnight. “In the short term, it’s hard for the gap to fall immediately from VND20 million to VND9-10 million per tael. It will narrow gradually and may need several months to reach around VND7-8 million,” Phuong explained.

He said there should be a registration process for gold import and production, which requires approval from the central bank, so the mechanism may not run smoothly until around October. After that, imported gold for production and distribution will take another 2-3 weeks to reach the market.

However, the decree’s issuance has already shifted market psychology. Buyers no longer have a “buy at all costs” mentality, while SJC gold holders looking to cash in may sell, easing market tension before official supply arrives.

However, as the decree has been issued, market sentiment has already changed. Buyers no longer rush to buy “at any cost,” while SJC gold holders looking to take profit will start selling. This will help reduce market tension even before new supply enters.

Answering the question of when domestic gold prices will drop to VND100 million per tael, Phuong said that the current global gold prices are $3,370/ounce, equal to VND114-115 million per tael after fees and taxes in Vietnam. So, the prices need to drop by $300 more to $3,000-3,050/ounce to force the domestic prices down to VND100 million.

Manh Ha