Vietnam’s gold market has been experiencing widening disparities between domestic and world gold prices, raising questions about the effectiveness and future of Decree 24.
Persistent Inadequacies in Gold Pricing
Decree 24, aimed at regulating the gold market, has seen mixed results. The gap between domestic and world gold prices has expanded significantly, highlighting the limitations of the decree. This gap has oscillated between VND 2 million to over VND 18 million per tael, pointing to deeper issues in the market dynamics and the regulations governing them.
Scenarios Impacting Gold Prices
Two hypothetical scenarios shed light on the gold market’s complexities under Decree 24. In the first scenario, with soaring world gold prices, domestic prices rise more robustly, widening the gap. Gold trading companies adjust buying and selling prices to manage risks, raising concerns about their gold inventory and potential depreciation.In the second scenario, if world gold prices decline, domestic prices may not decrease accordingly. This raises questions about how these companies will acquire new gold, leading to a pattern where domestic prices minimally decrease and the price difference with the world market grows.
Decree 24’s Mixed Outcomes
Decree 24 has been effective in managing the exchange rate and curbing the economy’s goldization. However, the prevalence of smuggled gold remains a challenge, with the price difference encouraging illegal activities. Law enforcement agencies have had to intensify efforts to combat gold smuggling.
Addressing the Gold Price Gap
To manage the gold price gap, some suggest that the State Bank should import gold for sale or allow gold trading companies to import gold for jewelry production. Gold jewelry prices have been consistently lower than gold bar prices, indicating a consumer shift towards gold jewelry due to limited availability of gold bars.