The State Bank of Vietnam (SBV) will auction 16,800 taels of gold on April 22, with a reference price of VND81.8 million ($3,214), VND2 million ($79) lower than last Friday's closing price.

The return of gold auctioning after more than 10 years is expected to bring gold prices closer to the global levels. Photo: The Hanoi Times

According to the SBV’s announcement, the gold auction will start at 10 a.m. next Monday (April 22) at the State Foreign Exchange Reserve Management Department. This move is aimed at increasing supply to the market amidst soaring prices, with the price gap between the domestic and global markets standing at VND12-VND13 million ($472-$510) per tael.

The expected auction volume next week is 16,800 taels, with each trading lot of 100 taels and a deposit rate of 10%. The reference deposit price is set at VND81.8 million ($3,214) per tael, with a bid increment of VND10,000 ($0.4).

SJC gold closed the trading session on April 19 at VND81.8 - VND83.8 million ($3,214-$3,293) per tael for buying and selling. Thus, the agency's floor price is approximately VND2 million ($79) lower, or 2.4% lower than the market trading price.

According to the operator, each enterprise is allowed to bid for 1,400-2,000 taels, equivalent to 14-20 lots. They are only permitted to bid a minimum price equal to or higher than the floor price.

Essentially, this auction is a form of buying and selling in which the SBV determines the counterparties, price, and volume. The participating units then submit their bid prices. Currently, 15 qualified units are set to participate in next week's auction.

The SBV advises that if it is unable to purchase precious metals on the international market due to insufficient supply from counterparts, the result will be canceled.

Global gold prices have recently been continuously hitting new highs, leading to an upward trend domestically. Compared to the global market, gold taels are currently priced VND12-13 million ($472-510) higher, while 24K rings are priced around VND7-8 million ($275-314) per tael, depending on the timing.

The management agency does not disclose data on the national gold reserves. However, according to data provided by the CEIC, Vietnam's reserves as of November 2023 stood at around US$660 million, accounting for about 0.7% of the total national foreign exchange reserves.

The return of gold auctioning after more than 10 years is expected to bring gold prices closer to the global levels.

Regarding gold imports, the SBV stated that enterprises with gold processing contracts with foreign partners are still importing gold. As for domestic jewelry manufacturing enterprises in general, the central bank requires its operational branches to collect information on the actual demand for gold materials for synthesis and consideration.

A representative of the Foreign Exchange Management Department under the SBV stated that the agency has reported to the Prime Minister on the implementation of Decree 24 for over 10 years on the management of this commodity. The operator assessed that this decree has many positive aspects, and has effectively enhanced the  management efficiency, but "it is time to review it to adapt it to the current situation."

Over the past decade, the monetary authority has monopolized the production of gold taels and only subcontracted processing to the Saigon Jewelry Company (SJC)   when necessary. The limited supply of precious metals over a long period of time has driven up prices to levels well above the global market when demand has increased.

Analysts believe it is time for the regulatory authority to consider relinquishing its monopoly on the production of gold bullion. Earlier, at a meeting in late March, the SBV proposed to end this monopoly.