Gold market: Crazy because supply and demand force prices

“Pick up the pulse” of madness

Closing the session on March 16, the domestic price of SJC gold bars was at 67-68 million VND/tael, down 500,000 VND/tael. This is the 4th consecutive discount session. One week since the peak of the gold price (March 8), the price of gold has decreased by 6.4 million dong/tael. After deducting the difference between buying and selling, for each tael of gold, people lost up to 7.5 million VND/tael. Contrary to the galloping price increase and then the plunge of SJC gold bars, the price of smooth round gold rings and gold jewelry fluctuated from 54.9 to 56 million dong/tael (buy in – sell out).

The fact that the price of SJC gold bars has gone up in the copper recently is one of the unusual things because, for a long time, gold bars are no longer used as a means of payment or a measure of value. In recent years, when the world experienced volatile events such as China devaluing the CNY (August 2015), the UK left the European Union – Brexit (June 2016), especially, from the beginning of this month. From 7 to mid-August 2020, the world gold price fluctuated to a record high due to complicated developments of the COVID-19 pandemic, but the domestic gold market continued to be stable. The domestic gold price increased in line with the world gold price, at one point reaching 62.2 million dong/tael (August 7, 2020), but the domestic gold market was stable, there was no speculative phenomenon. Whirlpool.

According to economic expert Dinh Trong Thinh, the unusual increase in the price of gold over the past time may have been due to a number of businesses shaking hands to raise the gold price to benefit. Especially in the context of high demand for gold while supply is increasingly limited. The growth rate of Vietnam’s gold consumption (gold jewelry) is up to 8% in 2021, but the SBV has not allowed the import of gold materials for a long time.

Currently, the domestic gold market consists of two main products, including: SJC gold, which is exclusive to the SBV brand, and physical gold in the form of jewelry and blister packs of other businesses. Previously, when choosing SJC as the state’s gold brand, the State Bank explained that gold bar production was a state monopoly, not an enterprise monopoly. Since Decree 24 took effect, SJC Company only has the functions of trading in gold bars, manufacturing and trading in gold jewelry like other licensed enterprises.

“The unusual increase in the price of gold over the past time, may be due to some businesses shaking hands to raise the gold price to benefit. Especially in the context of high demand for gold while supply is increasingly limited.”

Economic expert Dinh Trong Thinh commented

Regarding the price of gold bars, SJC is just one of many businesses and financial institutions trading in SJC gold bars. SJC gold bar price is determined by market supply and demand. SJC Company is not allowed to continue to produce gold bars, only process gold bars when required. SJC company cannot decide on the buying and selling price of SJC gold bars on the market.

The eternal reason of lack of supply

Mr. Nguyen The Hung, Vice Chairman of Vietnam Gold Business Association said that in the domestic market. Inflationary pressure is also one of the reasons why gold prices continuously peaked. Besides, the lack of supply, SJC monopoly is the “everlasting” reason.

From 2012 up to now, according to Decree 24, the State Bank of Vietnam manages the source of imported gold and imports it when necessary to make jewelry. The SBV only tendered gold in small drops, since 2014 no longer mentioned it, making the supply scarce. Meanwhile, the people’s demand for gold has always been high, growing steadily. According to the latest Gold Demand Trends Report of the World Gold Council (WGC), the total gold demand in 2021 in Vietnam is at 43 tons, an increase of about 8%.

Talking to Tien Phong, Mr. Andrew Naylor, Managing Director of the Asia-Pacific region (excluding China) said that Vietnam is mainly a consumer and retail market for gold, so the main Factors affecting consumer psychology will have the greatest impact. Factors that can affect consumer sentiment include: economic growth, inflation. Global inflation is expected to pick up.

Market research by the World Gold Council has shown that for many Vietnamese, fighting inflation is a key factor in buying gold. “Our research also supports the case for gold as an inflation hedge. During periods of low inflation, when inflation is 3% or less, gold’s historical average annual return is close to 7%. That number increased to nearly 13% during periods of high inflation”- the World Gold Council affirmed.

According to TPO