HANOI, April 16 (Xinhua) -- The State Bank of Vietnam (SBV) has so far held seven consecutive gold auctions, with the first on March 28 and the 7th on Tuesday, with the aim of balancing local supply and demand on gold.
The domestic gold market became more stable in the past few weeks as the difference between the selling and buying price in the domestic market went lower, while the gap between domestic and global gold prices is also gradually shrinking, announced the SBV in its statement after successful gold bar auctions in a row.
However, experts said that it would be difficult for the central bank to shrink this disparity.
Due to the global decreasing gold price in the past few weeks, particularly on April 16 morning when it plunged to its 30-year lowest level at 1,335 U.S. dollars per ounce, "the central bank's goal of making the gold price in the domestic market equal the price in the global market was not feasible,"General Director of the Vietnam Gold Business and Investment Company Tran Thanh Hai told local media.
If changed into Vietnamese price upon SBV's foreign exchange rate at 20,930 VND per one U.S dollar, the global gold price on April 16 morning stood at 33.7 million VND, about 5.9 million VND (281 U.S. dollars) lower than the domestic gold price by that time traded at 39.6 million VND.
On the first auction day of March 28, the disparity between domestic and global gold price stood at 3.2 million VND (152 U.S. dollars) per tael.
After seven gold auctions, the central bank sold out 183,900 tael, or over seven tons, of national SIJ-brand gold, out of 30 tons that the central bank are set for the auctions.
According to Hai, the central bank did not sell gold directly on the market, but released it through banks and gold trading companies, so no one could control whether the gold bought from the central bank was traded on the market.
Domestic commercial banks, which are due to close all gold accounts by June 2013, are said to be the main buyers of gold bars at the auctions.
Nguyen Quang Huy, Head of SBV's Foreign Currency Management Department, told local media that those banks would be the first bidders at the gold auctions for sure.
According to a representative from the central bank, who required to be unnamed, at the end of October last year, those banks still needed around 20 tons of gold to finalize all their accounts before June 2013.
This means that only after that date, the remaining amount of gold bars from the auctions may have been traded on the market, which may have some impacts on decreasing domestic gold prices and narrowing the gap with the global price.
Experts said since the central bank could not intervene in the local gold market through the auctions, especially in the context that the global gold price is volatile, the central bank should set up a gold exchange to stabilize local gold market in the long term.
The central bank can not sell gold forever, as the source of gold for the auctions was the national reserve, so gold exchanges would provide a way to balance supply and demand, said Tran Thanh Hai, chief of the Vietnam Gold Business and Investment Company.
He added that the central bank intervene in the local gold market only when there is an imbalance between supply and demand.
As scheduled, the 8th and 9th gold auctions will be held by the SBV on Wednesday and Thursday this week.
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