The State Bank of Vietnam (SBV), the country’s central bank, will propose the government replace a decade-old decree on gold trading with more market-oriented mechanisms to manage trade of the precious metal, SBV officials have hinted.
Speaking at a press meeting on Wednesday, Dao Xuan Tuan, director of the SBV’s foreign exchange management department, said that now is the time to review and amend Decree 24 on the management of gold trading after more than 10 years of its implementation.
The SBV will advise the government on a new policy this month to handle the trading of gold in the future, he added.
Effective in 2012, Decree 24 aimed to stabilize the gold market and macroeconomic conditions. Although gold prices have jumped recently, the USD/VND has stayed flat and banking activities have remained stable.
“Decree 24’s goals have been achieved, so it’s time we assessed whether gold prices should be determined by market rules or not,” Tuan commented.
Elaborating on Tuan’s comment, the SBV’s Deputy Governor Dao Minh Tu said that Decree 24 had accomplished its historical role and should have been amended long ago.
The decree was meant to fight back “goldization” (a term that indicates a preference for keeping gold as a means of reserve to hedge inflation) and to stop gold from affecting the handling of inflation, forex flows and forex rates.
The decree granted SBV a monopoly on gold production and made Saigon Jewelry Company (SJC) the sole maker of SJC-branded bullion.
The SBV will reckon whether to keep SJC as the sole maker of gold bars and allow other brands to trade in the time to come, Tu said.
Gold prices in Vietnam have been volatile over the past month, reaching a peak of VND80.35 million ($3,293) a tael late last month. Notably, the spread between domestic and global prices once widened to VND20 million a tael, and between buying and selling prices spiked to VND4 million a tael.
Tu stressed on Wednesday that the SBV does not tolerate such differences in prices.
Commenting on such volatility and abnormalities of the gold price, a number of experts have called for the removal of the SBV’s monopoly on gold trading and the replacement of Decree 24.
Prime Minister Pham Minh Chinh on December 27 requested the SBV to take measures to regulate domestic gold prices in line with market rules, not letting them go too far from world prices. Gold prices fell short after the request but have rebounded in recent days.
Dao Xuan Tuan of the SBV said on December 29 that the SBV stood ready to increase SJC-branded gold bullion supplies to the market and would take steps to limit the effects of gold price volatility on the forex rate, inflation and macroeconomic stability.
SJC set the prices of its gold bars at VND72-75 million ($2,952-3,075) a tael for bids and asks on Thursday morning, down VND500,000 ($20.5) on both sides from yesterday.