Remove gold monopoly to bounce back its normal state

Prof. Le Xuan Nghia

Since 2021, world and domestic gold prices have recorded many fluctuations. How do you assess this situation and what do you think is the cause?

Globally, gold is a very common commodity. In contrast, Vietnam market highly appreciate gold and many times Vietnam are "panic" because of gold. In fact, the fear of "goldization" only occurs when gold is deposited in commercial banks (gold becomes deposits or loans). Meanwhile, the State Bank (SBV) has separated gold from the banking system, prohibiting the use of gold as a means of mobilization and lending, so the risk of goldization no longer exists, even if gold is used to buy real estate, that is not called goldization.

The gold monopoly began in 2013, but for the entire period from 2014 to 2019, the market was quite stable, with no significant difference in domestic and world gold prices. However, since 2020 due to the global gold price increase, domestic gold prices increased faster, leading to a gap. In this context, we need to fully analyze and evaluate many factors, because from 2014 until now the market is still subject to the same policy, but market developments in the period 2014 - 2019 and the period 2020 - 2024 are completely different. In my opinion, the reason is because from 2020, the gold supply has been in shortage, which also partly creates a price difference.

Besides, currently, the quality of SJC gold bars is there is no difference between the quality of SJC gold bars and other gold bar brands, so the large price difference is unreasonable. Therefore, it is necessary to remove the monopoly on SJC gold bars so that businesses can do business on an equal basis like other businesses.

Although the State Bank of Vietnam conducted 7 SJC gold bar auction to increase supply to the market, the gap difference between domestic and world gold prices and the "gold fever" still show no signs of stopping. So is gold auction a solution to deal with "dancing" gold prices and what solutions do we need to implement to control gold prices, sir?

The record increase in world gold prices is due to rushing buying of overseas central banks to increase reserves. In that context, the State Bank should have studied increasing purchases of gold reserves rather than putting gold up for auction. Because the bidding method is not a complete solution but can only be a short-term temporary solution rather than a fundamental, long-term measure.

To eliminate the difference between domestic gold and world gold, commercial measures are needed, which is a fundamental solution and according to international practice. That is, it will allow qualified companies to import and export gold, using taxes and electronic customs for management. Because gold bidding is not a measure to increase supply; therefore, we can allow gold businesses to import and export gold and the State controls it with taxes. In this way, within 1 week, domestic and world gold prices are immediately equal. Because, gold and silver imports from Singapore, Hong Kong (China), and Thailand to Vietnam are very quickly.

However, it is a common thinking that if gold is imported and exported, it will affect the exchange rate as well as concerns about the source of foreign currency to import gold. What is your opinion on this issue?

In fact, the amount of foreign currency used to import gold is estimated to be not large, only about 3 billion USD, much lower than importing petroleum, less than 50% of vegetables or 20% of remittances, so we will not be too worried about this exchange rate. However, the tax level needs to be considered moderate to prevent gold smuggling due to high tax.

In particular, Vietnam is famous for processing gold jewelry. If the domestic gold price is equal to the world price, Vietnam can export jewelry like China and India do. This is also an important export item for these two countries. If the difference in domestic and world gold prices can be "valued", foreign currency from jewelry exports can compensate for imported raw materials.

Thank you, Sir!