SBV hopes 13 tons of gold can help cool gold market down

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The State Bank SBV hopes 13 tons of gold can help cool gold market downof Vietnam (SBV) has decided to launch more gold into the market, hoping that the additional supply would help ease the gold fever.

On September 19, 2012, SBV told the Saigon Jewelry Company (SJC) to make 350,000 taels, or 13 tons of gold. Deputy Director of the HCM City Branch of the State Bank of Vietnam Nguyen Hoang Minh said the amount of gold would be put into circulation to improve the supply.

The central bank also hopes that the additional gold supply would help narrow the domestic and the world price gaps.

However, experts say the measure may not bring the desired effect, because this is not the right remedy for the current disease.

The continuous gold price increase in recent days has been blamed on the sharp increase of the purchasing power, which has led to the supply-demand imbalance, thus pushing the price up.

Nevertheless, experts do not think so. In fact, the domestic gold price still has been following closely the world price, and it has been increasing steadily in accordance with the gold price hike.

Economists all believe that the gold price would keep rising in the world market, and they have affirmed this once more after the US FED releases the third round of quantitative easing (QE3) package to stimulate the demand.

With the big sum of money, US dollars would flood the market, thus causing the depreciation of the currency. In such a case, gold would be an alternative choice for investors instead of the greenback.

Another factor that supports the gold price hike trend is the statement by the EU Central Bank to buy bonds to support the eurozone economies to escape from the crisis.

Anticipating the upward trend of the gold price, international investors have decided to buy more gold, thus making the gold market scorching hot.

Deputy Governor of the State Bank Le Minh Hung also said the domestic price has been fluctuating mostly because of the gold price fluctuations in the world market.

On September 17, Hung, on behalf of the State Bank of Vietnam, reassured the public, saying that people should keep calm when buying or selling in order to avoid losses.

However, in fact, people did not get panicked, and they have been calm. Therefore, they understand well that the domestic gold price has been adjusted in accordance with the world price, but the adjustments are made a bit later than the world price adjustments.

They understand that when the gold price increases by one dong, domestic gold companies would raise the prices by three dong to ensure that they always can make profit. And when the world price decreases, domestic gold companies would only reduce the quoted prices some days later to avoid loss. Especially, the gap between the purchase and sale prices is always large to ensure that gold companies would never take loss.

Therefore, what the public expects now is not the intervention of the watchdog agency into the supply and demand basis. In fact, the similar moves of improving the supply to stabilize the market in 2011 did not bring the desired effects. The gold market still performed its way, while only gold companies chosen to join the gold stabilization program, could get benefits.

An official of the State Bank of Vietnam has also noted that unlike fertilizer or petroleum products, gold is not the essential goods. While the price fluctuations of essential goods would affect the macro economy, the gold price fluctuations would not cause negative effects to the majority of people.

(VietnamNet)

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