Gold Price Fluctuations in Vietnam in 2012 docx

Group 11

Gold price fluctuations in Vietnam in 2012
Gold Price Fluctuations
in Vietnam in 2012
Instructor: Dr. Hoang Xuan Binh
Group members:
1.
Nguyen Thai Ha
2.
Phung Thi Hao
3.
Nguyen Thi My Hang
4.
Phan Thu Hien
5.
Nguyen Thi Hue
6.
Nguyen Thi Hoai
Phuong
7.
Pham Ha My
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Gold price fluctuations in Vietnam in 2012
8.
Than Duong Thuy
9.
10. CONTENTS
11.

12.
13. INTRODUCTION
14.
15.
Gold has always fascinated the mankind’s imagination and influenced
their urge to possess the same. Gold occupies a pivotal role in the social and economic
life of poor and rich alike. In Vietnam, besides the economic and strong social
considerations, individuals are highly sentimental about the gold jewellery in their
possession, as the gold ornaments are passed on from one generation to another.
Acquisition of gold is considered auspicious and necessary for making family
ornaments to get a sense of wellbeing in our country. Gold is increasingly considered
as an investment that appreciates over years and provides a hedge against inflation.
Gold is also considered as a medium that can be pledged easily during difficult times
for securing financial accommodation.
16.
Gold price in Vietnam in long-time trend is upward but in short-time
period, the price of gold fluctuates very complicatedly. From 2001, gold price
increases continuously. In 2012, the price of gold is really “hot”. The enormous rise in
gold price causes an unhealthy psychological effect on people: when the price goes up,
they try to buy as much as they can, but when it falls, people tend to sell gold as
quickly as possible. This is one of the reasons for the expectation of increasing price
level of gold, beside the main factor brought by the fluctuations in global gold prices.
The instability of gold price seems to make Vietnam’s economy worsen. Moreover,
gold market in Vietnam has a close relationship with the market in the world. It raises
questions that what the causes, effects and solutions for this situation are; and which
will have a direct effect on?
17.
From the above, the reasons for this fluctuation, effects and solutions are
the most concern of many people. Thus, we chose “Gold price fluctuations in
Vietnam in 2012” as our topic. The assignment is presented in the following structure:

I.
Overview in gold price
II.
Gold price fluctuations in Vietnam in 2012
III.
Prediction on gold price in 2013 and policy suggestions
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Gold price fluctuations in Vietnam in 2012
18.
19.
20.
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Gold price fluctuations in Vietnam in 2012
I.
OVERVIEW ON GOLD PRICE
21.
1. Basic knowledge on gold
22.
23.
Gold is a chemical element with the symbol Au (from Latin: aurum
"gold") and an atomic number of 79.
24.
25.
Gold has significantly shaped the history of man, his economy and his
overall perception of life to being a simple hunter gatherer to a man who is driven by
the power of capitalism and understands the value of wealth and its possession.

26.
People hold gold for a safety, security and privacy thanks to its valuable
and highly sought-after precious metal for coinage, jewelry, and other. When buying
the right gold, it is easy to buy, sell, store and transport in a crisis. Many investors
around the world see gold as “the ultimate asset” – an important and secure part of
their investment portfolios. Gold has kept up with inflation during the past 200 years.
27.
Although it is one of the most popular investment portfolios, gold weight
measurement is different in each part of the world. Therefore, investors must study the
measurement of gold in the market they invest.
28.
2. Measurement of gold
2.1. Measurement of gold in the world
29.
Since gold is real money it doesn’t really have a price but more than an
exchange rate with other currencies. In the world, gold measuring is usually done from
2 points of view: Purity and Weight. The purity of gold articles may be described in
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Gold price fluctuations in Vietnam in 2012
two ways: Carat, meaning parts of gold per 24 and Percent, meaning parts of gold per
100. About gold’s weight, the most widely known and used measure unit for gold is
the troy ounce.
30.
31.
One troy ounce (480 grains) is 31.1034768 grams.
2.2. Measurement of gold in Vietnam
32.
In Vietnam, gold’s purity is also measured in carats. However, most

popular gold’s weight measurement here is “chỉ”, a traditional Vietnam weight unit.
Additionally, “cây” is another unit to measure a great amount of gold.
33.
1 chỉ = 3.75 grams
34.
1 cây = 10 chỉ
35.
36.
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Gold price fluctuations in Vietnam in 2012
1.
The formula to convert the world gold price to the domestic gold
price
37.
This is the general formula to convert the world price (WGP) to the
Vietnamese gold price (DGP)
38.
DGP = (WGP + shipping charge + insurance premium) * 1.20556*e
(VND/USD) + processing charge
39.
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Gold price fluctuations in Vietnam in 2012
II.
GOLD PRICE FLUCTUATION
IN VIETNAM IN 2012
40.

3. The situation of gold price in Vietnam
41.
In Vietnam, the average growth rate of gold price increases 24% per year
in recent years. The rate is so high that many people decide to invest into gold and gain
much profit from this investment. After that, the fluctuation of gold price affects
national inflation by philosophy and belief of residents.
42.
According to economic statistics, the growth rate of gold price in 2012 is
quite slower than that one over the last decade. The average growth rate in 2012 is
greater than that of 2011 by 7.83% but much lower than that of 2011 against 2010
(39%).
43.
44.
45.
Month
46.
47.
Gold price/tael (million
VND)
48.
31-01-
12
49.
43.75
50.
29-02-
12
51.
44.89
52.

30-03-
12
53.
44.23
54.
30-04-
12
55.
43.05
56.
31-05-
12
57.
41.59
58.
29-06-
12
59.
41.92
60.
31-07-
12
61.
41.79
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Gold price fluctuations in Vietnam in 2012
62.
31-08-

12
63.
42.98
64.
28-09-
12
65.
46.35
66.
31-10-
12
67.
47.36
68.
30-11-
12
69.
47.17
70.
31-12-
12
71.
46.47
72.
31-01-
13
73.
45.42
74.
28-02-

13
75.
43.32
76.
29-03-
13
77.
43.84
78.
30-04-
13
79.
42.83
80.
81.
82.
Gold prices can divide into 3 main periods from 2012:
•
From January to May 2012, gold price fluctuated. At the end of February
2012 it rose dramatically, from 43.8 million dong to 44.9 million dong but
after that it decreased sharply and reached the lowest point at May 2012
(41.6 million dong).
•
From May to August 2012, it remained stably at the average level of 42
million dong per tael. Positive relationship between gold price and risky
assets such as stocks was being raised.
•
On the contrary, gold price had the sign of recovery and rapidly reach the
peak with the figure of 47.4 million dong. It is obvious that the price of
gold in the global market that rose to $1,772.60 per ounce had pushed the

domestic market, which has been the trend during the first two weeks of
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Gold price fluctuations in Vietnam in 2012
October. However, from October 2012 gold market continued falling
temperature and declined steadily.
83.
As can be seen, the gap between domestic and global price of gold was
still quite big, which is between 2.8-3 million VND (roughly $140-150) in favors of
the domestic one, due to lack of a good connection between domestic and foreign gold
investors. According to Reuters, the level of profit that investors gain from gold
market is lower than other basic goods belonged into RJ/CRB Index.
84.
4. Causes of gold price fluctuation
4.1. The international influence on Vietnam’s gold price
85.
The world gold price and our domestic gold price have a strong relation.
Any changes in the global gold price can have direct influence on our country’s gold
price, and the price in the world can be the reference system for the price in Vietnam.
However, the gold price of Vietnam’s market is set by the government, so when the
gold price in the world changes rapidly, the Vietnam gold price reacts slowly. In 2012,
there was a rising trend all over the world, which directly caused our domestic price to
fluctuate in the same rising trend. Therefore, investing in gold was still the key to
profits in 2012. The phenomenon of increasing in price of gold in 2012 is caused by
some main factors.
86.
The first reason was the decline in gold supply. Gold is provided mainly
from gold mining companies, the recycling gold after being used and the possible sale
of gold of central banks. Some of the largest mining gold producers of in the world are

in South Africa, United States, South America and a little in Indonesia and Australia.
But in this year, mines in those countries were encountering difficulties. Strikes, power
outages and being forced to dig deeper into mines were increasing the cost of
excavating, especially in South Africa. This seems that the drop in production was on
the cards in 2012, and as we all know, fall in supply will lead to the rise in the price.
87.
The second one was the rise in demand. The demand for gold is
composed of three building blocks: Gold for technological applications (particularly in
dentistry and electronics), gold in jewelry and gold as an investment product. 2011
saw a 30% increase in demand for gold coins and this trend continued into 2012 as the
global economy still looked gloomy. Investors, to protect the wealth, intended to a safe
investment like gold.
88.
The third reason was the central bank activities. Central banks around
the world had bought some 150 tons of gold in the 3rd quarter of 2011. This was a
dramatic u-turn from traditional policy which was to sell. Venezuela had been in the
news as leader Hugo Chavez began the process of repatriating the nation’s gold
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Gold price fluctuations in Vietnam in 2012
supply. Central banks were looking for gold because they were unsure about the status
of foreign debts with some nations threatening to default on loans.
89.
The next one is low interest rates. The interest rates in all over the world
almost remained low in 2012 which reduced risks in investing in gold. There was a co-
tango between gold’s lease rate and interest rates which lead to a higher gold price.
Investors also had low regard for hedging companies which put pressure against the
process of hedging.
90.

In addition, one of the important reasons was the economic climate.
Various bailout packages and quantitative easing measures took action and give some
results. Typically, the economy of United States showed signs of recovery by the
quantitative easing policy (QE3) in October 2012; the EU public debt has been more
optimistic and the Chinese economy was not in difficulties after a hot growth period as
many experts considered. They had the direct impact on gold price. When the world
economy has overcome the crisis, the thoughts holding gold would be reduced, and
then it might lead to the downward trend in gold price in the next time.
91.
Finally, one more reason is jewelry. Nearly 50% of the global demand
for gold focuses on the jewelry industry; it was account for about 2000 tonnes in
4405.5 tonnes of total gold demand in the world. Moreover, the two countries were the
world’s largest jewelry market, China and Indonesia, have been experienced increases
in demand of gold. Although the physical amount of gold required for jewelry has
decreased from 2011 to 2012 about 4%, the increase in price of gold means that the
dollar demand was higher than ever.
92.
All the factors above indicate that the world gold price continue the
rising process following last 11 years. The high level of gold price in the world created
the psychology holding gold on individuals and businesses which directly and strongly
influences Vietnam’s gold price.
4.2. Domestic influence
a.
Demand and supply
93.
Vietnam is a gold import country. When the government set the gold
price lower than the equivalent world gold price, gold trading companies whose gold
source is available will export gold to gain profit. In case, the domestic gold price is
higher than the world price, they will import gold to supply the domestic market.
However, this source depends on the quota allowed by State Bank. Thus, the supply

hardly meets the demand of gold, which forces gold price higher and higher.
Speculation and smuggling make the price of gold in the country more difficult to
control.
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Gold price fluctuations in Vietnam in 2012
94.
The gold demand in Vietnam includes: gold for jewelry, gold for
accumulation, gold for production and gold for investment. They have the strong and
direct impact on the gold price in the market.
95.
Since the gold bars were used in Vietnam’s gold market, they began to
be used as a profitable investment channel or as a form of payment instead of cash.
The consequence of this development was that gold was manipulated by speculators,
which pushed prices up and up about an average of 24% per year.
b.
State’s policy
96.
In 2012, the government has many policies to stabilize the gold market,
but it seemed that they were not much effective.
97.
In this year, SJC gold is chosen as the national gold brand. In fact, SJC
gold accounted for the largest market share (more than 90%) which created a natural
monopoly advantage, when there is any gold price fluctuations, the scarcity of SJC
gold makes the gold market much more volatile. After that, SJC gold has the highest
price compared to other brands in the country. At the end of 2012, there was a very big
gap between the domestic price and the world gold price (4.5 million/tael).
98.
In May 2012, the government announced the provisions of Decree 24

about trading of gold bars, the government is exclusive in producing gold bars,
importing and exporting raw gold and there is no discrimination between SJC gold
bars and others. Therefore, the gold bars including SJC or others are all recognized,
protected by law and purchased, sold, exchanged in spite of discriminatory prices for
other gold brands.
99.
In addition, Circular 16 and 14 of the State Bank on the management of
gold trading activities and regulation of credit institutions have to stop mobilizing and
lending in gold, firms are not allowed to convert gold status in their account into
physical gold and they are just allowed to buy gold in the domestic market only.
Consequently, the firm not only lost billions of dong but also did not contribute to the
state budget, causing gold fever.
100.
In short, the inconsistency in the regulation of the function of the
government in gold trading activities leads to many loopholes in gold trading activities
and controlling gold prices in the country.
c.
Crisis
101.
The macroeconomic situation is not stable in 2012 made people have a
tendency of buying more gold for accumulation and investment. According to
Planning & Investment Ministry, 2012 witnessed 54,261 bankruptcies of enterprises,
lack of capital in manufacturing, paralyzed banking, so investing in such thing as
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Gold price fluctuations in Vietnam in 2012
immovable assets, stocks, and finance market was so risky that many investors chose
gold as safe haven asset. Obviously, the increasing in demand accelerated the gold
prices.

d.
Inflation
102.
The inflation in Vietnam is reduced from 18.13% in 2011 to 6.81% in
2012, but it is still a big number and additionally, the prices of almost things in the
market have increased all the time especially gasoline and oil; so that, Vietnamese
people have a strong belief that inflation rate would be high in the future. They
consider gold as a perfect thing preserving the value. Keeping gold at home is a long-
standing habit of Vietnamese people and it seems that this habit certainly will be
favored in the future.
e.
Investor’s psychology
103.
The decision of investors can be affected by many factors. When they
feel positive about the market, they will invest more. It seems that, Vietnamese people
are likely to purchase more gold when the prices appear to rise. However, with the
unsteady and cautious psychology, if they hear any bad news like financial scandals
and corruptions, many of them will worry and might be lose everything. For example,
the capture of Nguyen Duc Kien and the reassignments of 4 senior leaders of ACB and
Eximbank caused a lot trouble for ACB bank and other financial banks. Customers felt
unsafe of their money and many of them withdrew to buy gold. This sudden rise of
gold demand made the gold price have a high jump, widening the gap between the
local and international price (5 million VND/tael).
104.
5. The impact of gold price fluctuation in Vietnam
5.1. Impact on real-estate in Vietnam
105.
106.
107.
According to a legal term used in jurisdictions such as the United States,

United Kingdom, Canada, Australia and New Zealand, real-estate is “Property
consisting of land and the buildings on it, along with its natural resources such as
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Gold price fluctuations in Vietnam in 2012
crops, minerals, or water; immovable property of this nature; an interest vested in this;
(also) an item of real property; (more generally) buildings or housing in general. Real-
estate also means “the business of real-estate; the profession of buying, selling, or
renting land, buildings or housing”.
108.
Dr. Nguyen Tien Dung, CEO of the Institution for Research
Administration identifies that higher gold prices greatly affect the real-estate market.
•
Gold is used as the unit of account in housing transactions:
109.
According to a survey, in Hanoi, most of the real estate transactions are
no longer tied to the price of gold as before, but in Ho Chi Minh City, by contrast,
paying these real estate transactions in gold is quite common. As gold prices surge,
especially when Vietnam dong is not reliable and safe enough, the individuals or
investors must find ways to purchase real estate in gold or dollars instead. The amount
of real estate transactions in gold is still up to 60% or 70%.
110.
When the gold price increases, the purchasers will need more money to
pay for the same amount of gold. This gap is really a big burden especially when the
price of gold rockets and the amount is large. This reality ceases the purchasers from
conducting their expected transactions because they believe that the price of gold is
very likely to keep rising in the near future and they may experience a great loss.
111.
Moreover, gold is also considered as the unit guaranteeing the value of

the borrowing when people want to make a loan to purchase real-estate properties.
This means that when gold price increases, they bear a much bigger debt than they
expected, which leads to the same situation as mentioned above.
112.
Faced with the sharply rising gold price and current instability, real-
estate market becomes very bleak. Many of the transactions were deposited by gold in
advance but due to changes in the price of gold, these transactions have been broken or
bust. Home buyers or investors are very afraid of the sales that require payment in
gold, because gold seems to increase in the future.
•
Gold is a popular means of speculation:
113.
When the gold price spikes, more people moved from real-estate to
invest in the gold with the hope that the price of gold will continue to rise in the future.
This resulted in reducing demand for real-estate and oversupply occurred. The obvious
result is the market become immensely stagnant and dull, or even frozen.
114.
A part of the sellers wants to carry out transactions in gold and gain
benefits due to price difference.
115.
Given the situation of Vietnam gold market over the past two years in
which the gold price varied unpredictably but had the upward overall trend, not only
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Gold price fluctuations in Vietnam in 2012
do the real-estate sellers become quite reserved in selling because they expect the price
keep on rising to get more profit but the buyers are also prudent to buy. On the whole,
the dramatic, continuous and unpredictable rise in gold price cause the real-estate
market to be confused and disoriented which leads to the reservation of all the

transaction parties. Consequently, the market gets stagnant.
116.
5.2. Impact on commercial bank activities.
117.
Firstly, commercial banks finds it difficult to lend to customers in gold
because when the price of gold increases, they have to pay much more money for the
same amount of gold, which also means a huge loss. Meanwhile, statistics showed that
the capital mobilized in gold has reached 95 trillion dong (115 tonnes of gold, or $4.8
billion). This fact leads to the imbalance of funds, lack of capital investment in the
surplus of gold reserves. On the other hand, if the price fluctuates much, commercial
banks suffer with lots of risks:
•
Debt evasion of their customers. When customers forecast gold price falls,
they sign a contract to sell gold to the banks at a fixed price, if it falls as
expected, they will buy gold to return to the banks and enjoy the price gap.
Conversely, they will lose.
•
Collateral of gold contract. Collateral consists of money deposits, shares,
letter of guarantee, warranty. In the case of customers’ loss, they do not
implement their duties; the banks can not sell their shares, or other
valuable papers to withdraw funds. Again, the banks lose their capitals.
118.
Secondly, the increasing gold price encourages gold speculation. People
would withdraw money from banks to buy gold to store up instead of depositing at
banks. As a consequence, capital is concentrated in gold market; capability of
mobilizing capital of the banks has been reduced. Besides, the client’s withdrawals
from banks to speculate in gold will increase the amount of money in circulation,
leading to higher inflation. Higher inflation means that the State Bank must implement
monetary tightening to reduce the volume of money in circulation, but loan demand by
businesses and individuals is still very large, banks can only meet applications for a

few customers with signed contracts or really effective projects, under the level of risk
allowed. On the other hand, due to rise in interest rate, this has worsened the
investment environment of the banks, moral hazard will occur. As the purchasing
power of Vietnam falls, the price of gold and foreign currencies increases, raising
capital with a term of 6 months is really hard for each bank, while loan demand for
medium and long-term is large, so the use of short-term loans for medium and long-
term loans over time in each bank is not small. This has affected the liquidity of the
banks, the risk term is unavoidable.
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Gold price fluctuations in Vietnam in 2012
119.
In addition, according to the Circular 12 (2012) of State Bank, from
26/11/2012, all of commercial banks must stop mobilizing gold. Therefore, in order to
abide the Circular, the banks had to buy gold to pay back to the customers with high
price. So they got lost. In 2012, ACB got lost up to 1,700 billion VND.
5.3. Impact on macroeconomics and monetary policy
120.
The fluctuation of gold market caused a serious impact on the
macroeconomics, resulted in the changes of monetary policy.
f.
Slow down the interest rate reducing process
121.
Beside the actual demand of storage, the investment of gold quickly
creates great profit and it become one of the channels of investment which is preferred
to the saving money in the banks. In 2012, interest rates on deposits in the most of
banks was lower than 14% a year, the amount of interest when the saver spent 100
million on banks is 38,900 VND, which is much lower than the interest of gold
fluctuation every day.

122.
The last months of the year are the time when firms and people increased
withdrawals for production, spending, shopping, rewarding, etc. Then, people
continued spending money on gold instead of saving in the bank because gold price
was higher, the system of liquidity was stress, this meant reduction of interest rate
process was prevented due to people’s money withdrawals to buy gold.
g.
Foreign exchange reserves fall
123.
Foreign exchange reserves play an important role in evaluating the
financial potential of a country. Most countries maintain and manage foreign exchange
reserves in order to serve the basic objectives such as the implementation of monetary
policy and exchange rate policy, maintaining the liquidity of the foreign exchange
market, limiting the impact negative in the case of the financial crisis. In Vietnam,
domestic gold consumption increased when the world gold prices are lower resulted in
the amount of foreign currency which was used to import gold became higher.
Meanwhile, firms bought foreign currency from the free market or from commercial
banks leaded to the stress of demand and supply of dollars increases. State Bank of
Vietnam (SBV) had to sell foreign exchange to stabilize the market, foreign exchange
reserves was declined.
h.
People’s beliefs in government declines
124.
When the price of gold fluctuates, SBV always calmed down and
recommended that people should be careful when buying and selling gold in order to
avoid being disadvantaged by speculators and SBV allow importing gold. This showed
that short-term decisions of SBV had not been able to strengthen people’s belief on the
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Gold price fluctuations in Vietnam in 2012
ability to the Government. In addition, when people preferred foreign currencies, gold
is a channel of the storage and speculators which creates big profit, the strength of the
VND is significantly affected.
5.4. Impact on speculators
125.
As we can see, in 2012, the gold price in Vietnam followed a dramatic
erratic trend, which is the result of some major factors: the impacts from ECB, FED or
the fluctuations in the economy recession. On top of that, some domestic facts also had
a significant influence to gold price in reality, such as the impact from monetary
policies, the increase in oil price and activities from commercial banks. Moreover,
there is no doubt that the reactions of speculators, who buy when the supply is
abundant and the price low, pushing up the price fluctuations and the fact that gold
market in Vietnam always stayed at higher price level than the world price.
126.
In 2012, with the purpose of speculation to manage all gold market,
many organizations and individuals purchased a large amount of gold and kept them as
a store of value until gold price increase dramatically. “Speculation can mean many
things and take many forms. Basically, it is the attempt to profit from price changes”.
To be more precise, in one side, the significant changes in gold market in Vietnam
brought a precious opportunity to make profit for brilliant speculators. Unexpected
gold price fluctuations encouraged short term speculation. In other words, because it is
hard to foresee the change in gold market, also, as far as they knew, in the long term,
sending VND to banks possibly was a smarter, safer and more profitable way, the
speculators just kept gold for a short time before selling it, as long as it brought them
profit. It is the best way to prevent their assets from losing value.
127.
On the other hand, gold price changing unexpectedly brought great risks
to speculators, which means if they did not have the ability to catch chances to sell or
buy gold intelligently, they would lose money. Fact have shown that many individuals

and companies bought an enormous quantity of gold and did not sell it into gold
market, leading to the shortage in supply this metal, with hope of raising the price
continuously, and then they could sell it with much higher price than the price they
bought. However, this is risky and many of them had to pay an expensive price to this.
The gold price increasing and decreasing making them selling them at lower price and
went bankrupt.
128.
Turning to other issue, in the last months of 2012, under the impacts of
increasing inflation, the gold price rose fast. Many people guessed that the price would
exceed 50 million/oz. But as expected, speculators could realized that this price level
was far from normal, if the price continued to rise and lots of control, it was risky to
them.
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Gold price fluctuations in Vietnam in 2012
129.
Actually, the condition of gold price fluctuations in 2012 had a great
impact on speculators or investors in Vietnam. It not only brought chances but also
risks to them.
130.
131.
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Gold price fluctuations in Vietnam in 2012
2.
Reaction to stabilize gold price of the Government and State bank in
2012
132.

Witnessing the fluctuations in gold price, Government and State Bank of
Viet Nam (SBV) did certain moves to timely respond to the situation. In early 2012,
SBV did not allow the import of raw gold to produce gold bar and also did not
implement gold stabilization as well but, gold smuggling across the border hardly
occurred. As a result, the exchange rate and foreign currency market stayed stable, not
being negatively affected by the volatility of gold price. As directed by the
Government, to control the gold market, the SBV has developed a roadmap to prevent
“goldenization” of the economy. The roadmap consists of three phases as follows:
•
Phase 1: Formulating a strict legal framework to manage the gold market;
•
Phase 2: Termination of mobilization and lending in gold by credit
institutions;
•
Phase 3: Fully turning the gold bar mobilizing and gold loans into gold bar
trading;
133.
The State was to responsible for gold mobilization by buying gold to
increase the official reserves and capital supply to the economy.
134.
On April 3, 2012, the Government laid out Decree No. 24/2012/ND-CP
(Decree 24) to replace Decree No. 174/1999/ND-CP dated December 9, 1999 on gold
trading management. This is a sound decision-making of Government to stabilize the
gold market and prevent gold speculation. Specifically, the issuance of Decree 24 aims
at the two main objectives. The first is to reorganize the gold-bar market, prevent the
adverse consequences of the gold price fluctuation to the exchange rate, inflation and
macro-economy stabilization. The second is to enhance the state management of the
gold market, prevent and drive back dollarization in the economy, take proper
measures to mobilize gold resources from the population for the social-economic
development. Decree 24 also acknowledges the legal right of the gold ownership by

individuals and enterprises; the right of gold bar trading at credit institutions and
enterprises designated by the State.
135.
In response to Decree 24, the governor of SBV issued Circular
No.16/2012/TT-NHNN (Circular 16) on May 25, 2012 guiding a number of articles of
Decree 24 on management of gold trading activities. Circular 16 stipulates in detail the
conditions and requirements to grant gold bar trading licenses for credit institutions
and enterprises.
136.
Before the issuance of Decree 24 and Circular 16, SBV chose SJC
(Saigon Jewelry Company) as a wholly-State run company and the country’s national
brand with 95 per cent share of the local market. However, after the central bank
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Gold price fluctuations in Vietnam in 2012
decided SJC was not allowed to wholly produce and distribute, the SJC gold bullion
was now controlled by the central bank and SJC gold trading was similar to the trading
conducted by other companies. Specifically, on December, 2012, SBV decided to
grant gold-bar trading licenses to 17 credit institutions and 14 enterprises which meet
the condition, applications and procedures stipulated in Decree 24 and Circular 16.
These credit institutions and enterprises have about 2000 gold bar trading transactions
points distributed over 63 provinces.
137.
With strict provisions on the gold trading management, the gold market
is being reorganized basically step by step in order to protect the legal right and
interest of people. Citizens feel more secure when buying and selling in licensed gold
bar market with public and updated information on gold price and healthy competition
among service providers. According to Circular 16, enterprises and credit institutions
without gold bar trading licenses granted by SBV are not allowed to trade gold bars.

The regulation is designed to make it easier for the central bank to manage the local
gold market. At the same time, the monetary authority also hopes to relieve the high
pressure on public gold holdings caused by the limited number of gold selling points in
recent time.
138.
At the end of 2012, SBV affirmed that the year 2012 marked the first
step in the gold market management in accordance with the policy oriented by the
Government. SBV made great efforts to advise the Government in completing the
legal framework, implementing the termination of gold mobilization and lending by
credit institutions and the application of measures to manage the gold market. Thus,
the domestic gold prices, especially in the gold bar market of 2012, experienced many
significant changes. In spite of considerable fluctuations in global and domestic gold
price, the big gap between global and domestic gold price did not go along with the
phenomenon of “gold fever” as before. In addition, transactions took place at reliable
and professional business entities, better ensuring people’s interests.
139.
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III.
PREDICTION ON GOLD PRICE IN 2013
AND POLICY SUGGESTION
140.
6. Prediction on gold price in 2013
141.
The year 2012 finished with an upward trend in gold price level which is
a good signal for Vietnam’s Economy. However, it can be clearly seen that the gold
price will change in 2013. On that condition, many renewed financial and economic
professionals from well known magazines and organization revealed their forecasting

on the trend of world gold price in 2013.
6.1. Goldman Sachs
142.
Goldman Sachs cut forecast for gold price in 3 months, 6 months and 12
months to $ 1,825 / oz, $ 1,805 / oz and $ 1,800 / oz respectively. Yesterday 5/12,
Goldman Sachs said increasing cycle of gold price will end next year when real
interest rates rise and the global economic recover growth. Specifically, Goldman
Sachs cut its forecast gold price in 3 months, 6 months and 12 months to $ 1,825 / oz,
$ 1,805 / oz and $ 1,800 / oz respectively. "In the medium term, gold prices will be
under pressure as the U.S. economy’s slow recovering growth momentum," Goldman
Sachs said.
6.2. GFMS chairman, Philip Klapwijk
143.
Speaking to Reuters, GFMS chairman, Philip Klapwijk said: "We expect
gold prices will reach a new peak in early 2013 after declining slightly this year due to
a decline in investment demand in many major markets”."We expect that gold prices
will rise above $ 2,000 /oz in 2013, but 2013 could mark the peak of the market which
depends on whether we see one of the solutions in Europe that is enough to solve the
debt problem or not or U.S will withdraw stimulus measures and the prospect of
normalizing monetary policy," said Klapwijk. He predicts gold prices will fluctuate in
a range from 1.530 to 1.920 $ / oz in 2012 and the average price $ 1.731 / oz. "What
we see is the delay of another strong increasing. Milestone of $ 2,000 / oz could be
conquered in the first half of 2013 than the second half of this year," Klapwijk said
before the release GFMS Gold 2012 report.
144.
Marketing analyst Sean Lusk of Precious Metals Ironbeam Company
145.
Marketing analyst Sean Lusk of Precious Metals Ironbeam Company
said that the negative sentiment on gold has existed in recent months as the stock
market rose to a record high and the investment banks reduce the prediction of gold

prices. Predicting the direction of gold, Lust said that the gold price may continue to
test the $ 1400 / ounce after falling down in the last session.
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6.3. Credit Suisse Group AG
146.
Credit Suisse Group AG said gold price has fallen 17% since the
beginning of this year and aims to reduce by 20% in this year because of not
accelerating inflation and the worst risk of global economic warnings. Ric Deverell,
head of commodities research at Credit Suisse from 2010, after working in the Reserve
Bank of Australia said that the price of gold will trade at $ 1,100 / ounce in the next
year and $ 1,000 in the next 5 years. Price reduction does not seem to attract the
central bank buying.
6.4. HSBC
147.
HSBC cut its forecast for average gold price in 2013 to $ 1,760/oz, from
$ 1,850 forecast/oz .After considering closing price in 2012 at $ 1,675/oz, HSBC
predicted lower average gold price this year to $ 1,760/oz, from $ 1,850 forecast/oz. In
addition, HSBC forecasts unchanged average gold price in 2014 at $ 1,775 / oz and
predicted for 2015 at $ 1,675 / oz. However, HSBC also said that the gold market
tends to go up in 2013 thanks to the support of basic elements such as supply -
demand. HSBC predicts India's gold demand will bounce back in 2013 as traditional
consumer trend of its people.
6.5. Do Minh Phu – president of gold and gemstone DOJI group
148.
“After 30/6, the distance of gold price between domestic and
international market would rather than logical”. This is the opinion of Do Minh Phu –
president of gold and gemstone DOJI group because demand and supply nearly reach

equilibrium. In addition, the request of investors will not too high and the gold price in
the international market tends to go down.
149.
Prediction gold price is not simple. However, it can be seen that the
increasing price period from 2000 to 2012 is continuous. Within 12 years, the price of
gold reached an average increase of 27%, even in some periods, it increased by 33%.
But in 2013, the gold price does not go along the previous cycle and is on downward
trend. . It can be said that the gold rally may remain in the medium term. In short, the
price of gold will have great pressure, because the belief in gold will no longer similar
to time before.
150.
Broader global economy, we can see that there are an emerging signs of
recovery especially the stronger dollar shows that the U.S. economic indicators are
quite impressive. Therefore, investors are finding the riskier investment channels, they
are no longer considered gold as an attractive market. On the other hand, the credit
funds tend to sell out constantly which is creating pressure on the gold market. He
thinks that the current domestic price pressure is difficult to break higher. However, I
do not entirely believe that domestic prices will go down from now until the end of the
year but hardly increased at a high level as the previous year.
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151.
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Gold price fluctuations in Vietnam in 2012
7. Policy suggestion
7.1. Short-term solutions

152.
Firstly, the State Bank of Vietnam (SBV) should issue promissory notes
in gold, so-called paper gold, and sell to commercial banks. Besides, the SBV should
give permission for commercial banks to receive banks deposits which are guaranteed
by gold. By this way, the situation that people withdraw deposits in VND to buy gold
which making the loss of liquidity in commercial banks could be avoided.
153.
154.
Secondly, because exchange rate between USD/VND impact
significantly on gold price, SBV should stabilize this exchange rate. One of solutions
is SBV borrow gold from commercial banks by issuing long term bonds and resell
those gold to trading enterprises. These enterprises are required to pay SBV in USD
and then, this amount of USD will be used to stabilize the exchange rate.
155.
Thirdly, SBV can reduce the gap between domestic gold price and the
world gold price by allowing enterprises import and export freely gold plates.
156.
Finally, gold monopoly market should not exist. Reality has proved that
since government authorized SJC to become national gold producer, gold price has not
been stabilized and the gap between domestic gold price and world gold price is
widening.
7.2. Long –term solutions.
a.
Establishing national gold trading floor.
157.
According to PhD Le Dat Chi, Ho Chi Minh University of Economics,
establishing national gold trading floor could bring following benefits. Firstly,
government can static and control gold and foreign currency speculation and tax gold
trade. Therefore, government budget will increase and exchange rate pressure will
reduce.

158.
Gold trading floor must be managed by the state. Gold will be listed as a
type of stock. Both domestic and international investors can join the market. This
solution will help reduce differences in gold price and prevent gold smuggling.
b.
Mobilizing gold reserve in the population
159.
According to Mr. Nguyen Van Binh, Governor of the State Bank of
Vietnam, there are about 250 to 400 tonnes of gold in population. It is huge amount
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Gold price fluctuations in Vietnam in 2012
and if government could mobilize this gold, gold supply will increase sharply.
Consequently, price of gold will reduce.
160.
The state should educate citizens about gold speculation, both
advantages and disadvantages for themselves and national economy. Moreover, the
most important solution is conversion from gold bars into gold certificates and vice
versa. The Sate Bank will issue gold certificates to gold holders and keep their gold
with suitable interest rate.
161.
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162. REFERENCE
163.

Online articles:

1. Latest Issue: Gold Demand Trends Q1 2013, May 2013,
/>2.
Giá vàng lại nới rộng chênh lệch mua – bán, April 2013,
/>3.
Lê Khắc, 2013, Nói và làm: Bắt đầu ép giảm chênh lệch giá vàng,
/>4.
Minh Ngọc, 2013, Giá vàng: Từ năm 2012 nhìn tới năm 2013,
/>254636.htm
5.
Phí Đăng Minh, 2011, Bình ổn giá vàng nhìn từ kinh nghiệm quá khứ,
/>nghiem-qua-khu.htm
6.
Nghị định 24/2012/NĐ-CP quy định về kinh doanh vàng, 2012,
/>kinh-doanh-vang.html
7.
Thông tư 16/2012/TT-NHNN hướng dẫn Nghị định 24/2012/NĐ-CP về quản lý hoạt
động kinh doanh vàng, 2012, />TT-NHNN-huong-dan-Nghi-dinh-24-2012-ND-CP-kinh-doanh-vang-
vb139697.aspx
8. Đã qua thời “vàng bỏ ống cũng có lãi”?, 2013, o/da-qua-
thoi-vang-bo-ong-cung-co-lai-2.html
9.
Nguyen Duc Kien's arrest in Vietnam prompts ACB fears, August 2012,
/>10.
SBV to stabilise gold prices, March 2013,
/>
General website:
11.
/>164.
165.
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