Gold prices decided by hidden faces
Gold prices decided by hidden faces
It always surprises people that the domestic gold price does not come in line with the international price. Which power in Vietnam can define the gold price, then?
At noon on a day in early October, 2012, an officer of a commercial bank spoke on telephone: “the A party has halted collecting gold because the price has been increasing too rapidly. It’s now 48.4 million dong. Be careful, the price may drop this afternoon.”
What she said came true this afternoon. At 1.30 pm of the same day, the gold shops on Le Thanh Ton street next to the Ben Thanh Market in district 1 of HCM City, unanimously posted the sale price at below 48 million dong per tael, which meant the sharp decrease of 500,000 dong per day just within 100 minutes.
On Nguyen Cong Tru Street in district 1, HCM City, the electronic board hung in front of the Saigon Jewelry Company (SJC) also showed the same prices as the ones posted by private gold shops.
SJC cannot decide gold prices
The gold price has soared from 42 million dong two months ago to 48 million dong. People, investors, speculators now rush to sell gold to make profit.
SJC has confirmed that people now sell more than buy. However, it has affirmed that it will not slash the gold price spontaneously.
“We adjust our prices in accordance with the market price which is decided by the supply and demand. We are not powerful enough to decide the prices,” an executive of SJC said.
SJC did not tell lie. The 100 percent state owned company, which has the biggest sales in the country and owns the SJC gold brand, is not the power which decides the domestic price.
Like other state owned, limited or joint stock gold companies, SJC has to follow the current regulations on the gold position. In order to have money to buy gold, SJC also has to borrow money from banks and pay interest for the loans like any other legal entities in the national economy.
A gold expert compares SJC with a farmer. Farmers produce rice, but they cannot decide the rice prices. SJC makes billion gold, but it is not the power that intervenes in the market and does not possess gold.
Wholesale traders define the market prices
In general, gold shops post the gold prices of the new days at 9 am. Prior to that, SJC and some other commercial banks posted the prices of the days, but it is just for the form’s sake. The posted price is set after considering the last days’ closing prices and the international prices.
It is the interlacing wholesale trade network, combining a lot of different links which decide the market prices. However, the big guys in the networks do not decide the prices spontaneously. They only make decisions based on the supply and demand basis. Meanwhile, the supply and demand situation can be drawn based on the information they collect.
For example, if they know that a commercial bank today needs 1000 taels of gold deposits, but it still does not have gold in coffer to pay, they would push the gold prices up. However, when the demand no longer exists the next day, the prices would fall down again to the previous levels.
If they hear that some banks plan to sell gold to settle their dong liquidity problem, the prices would be lowered, because they know that banks would have to sell gold to some big wholesale buyers and they should not expect to retail the gold just within one day.
vietnamnews
