Though domestic gold prices crashed by VND850,000 per tael compared to late last week, buying power declined sharply on Monday after the central bank has announced to continue supplying gold for the market.
Saigon Jewelry Company (SJC) quoted gold prices at VND36.8 million and VND37.15 million per tael for buying and selling respectively. Many banks and enterprises also posted up prices at around these levels.
A representative of SJC’s sales department said that the enterprise received few customers on Monday. Buying power declined sharply compared to the previous week while selling power slightly increased.
Retail store network of Phu Nhuan Jewelry Company (PNJ) saw the same situation. Nguyen Ngoc Trong, PNJ’s sales director, said that the company transacted fewer than 500 gold taels on Monday, only half of last week’s daily average, of which it bought 70% of the volume.
Demand for gold has reduced as people are concerned about further gold price decline on the world market.
Meanwhile, people late last week thought that the central bank would stop gold auctions but the agency then has announced to put up 40,000 gold taels for sale today. Therefore, they did not buy up gold to wait for prices to drop further, Trong said.
Le Minh Hung, deputy governor of the central bank, said that the central bank would keep selling gold to meet market demands in the coming time. Banks currently only buy gold to transact with people, help customers buy gold to pay debts while they have had enough gold to pay depositors.
From today, banks will run just gold buying or selling activities while all lending and mobilization activities have ended. Lenders will provide gold custodian service for gold accounts mobilized earlier. Customers who fail to close these accounts as scheduled will have to pay fees for the service.
The central bank is inspecting gold transaction in big cities. It will also monitor to see whether banks still maintain gold mobilization and lending and will take punitive sanctions against violators.
Gold outstanding loans now stand at over 200,000 gold taels. Some banks have negotiated with customers to convert the loans into dong while others still wait for these credits to fall due.
Trong of PNJ earlier has warned gold buyers of a high danger of loss as price of the precious metal is expected to fall further in the coming time.
Both short and long-term trend of gold prices are ‘down’ for now. International news such as the end of the Federal Reserve’s massive bond-buying program by 2014 has thrown support to gold price decline.
Since last month, many central banks and funds have offloaded gold, raising the curtain for further price decline in the further. According to technical analysis, the world gold price may tumble to US$1,150 an ounce.
In longer term, the gold market will see weaker demand from India, one of biggest gold consuming countries in the world. The nation will apply measures to force its enterprises to limit gold imports, reducing gold volumes running into its market.
Therefore, gold buyers are facing two high risks. If global price declines, domestic prices will also follow the trend. Secondly, local prices may keep falling despite rising global price because the gap between the two prices is over VND6 million for a tael now.
If the central bank continues to sell gold, the gap will narrow down and buyers will incur losses, Trong explained.