Global gold prices plunging, Vietnam's decreasing slowly
06-SEP-2008 Intellasia | Tuoi Tre | Vietnamnet
Sep 6, 2008 - 7:00:00 AM
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In the last two days, the world's gold price has dropped dramatically by 700-800,000 dong per tael, while the domestic price has decreased by 300,000 dong per tael only. It seems that the domestic price does not follow the international market too closely, a fact which has brought disadvantages to Vietnamese gold buyers.
On September 3, the world's gold price dropped sharply and then hovered around US$790-800/oz. With the import prices, importers would have made profit if they sold at 16.35 million dong/tael after counting expenses and tax. However, the domestic price has been staying firm at over 17 million dong/tael.
Previously, gold trading firms reasoned high purchasing power to explain why domestic prices were much higher than the world's levels. However, this proves to be an unreliable explanation now, as domestic prices continue to be higher than the world's levels even in the context of low purchasing power.
In fact, the purchasing power is so low that illegal gold imports are also unsalable (In general, illegal gold imports break out when domestic prices are higher than the world's levels).
The key that explains why domestic prices have remained higher than the world's levels is that gold trading firms have been taking full advantage of the adjustments of the gold import policy in order to minimise their losses. In the first months of the year, the firms, believing in the high purchasing power of the domestic market, rushed to import gold when the world's prices were very high. The rush to import gold has turned Vietnam into one of the biggest gold consumers in the world.
Most of the gold imported at that time had the import price at over US$900/oz. The world's gold price has been decreasing lately, but the importers are not cutting sale prices in order to avoid losses.
Experts say that gold importers still have big volumes of gold they imported with high prices. Meanwhile, the purchasing power now tends to decrease as there are positive signs of the macro-economy (lower inflation rate, improved liquidity of banks and stable exchange rates).
A question has been raised about why state management agencies did not allow companies to sell other commodities at high prices but neglected gold companies.
Experts say that Vietnamese customers have been suffering losses from the high domestic prices. They said that in order to help ease losses to customers, state management agencies need to give warnings about the possible risks customers may face if they try to buy gold at this moment at high prices.
The State Bank of Vietnam has advised people to be cautious with gold investment deals as the domestic prices are abnormally high.
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