State monopoly on Vietnam's gold market needs to end: Expert

THE HANOI TIMES — It's time to restructure the gold market fundamentally to control and mobilize the valuable dormant resources held by the populace more effectively.

Hoang Van Cuong, a member of the National Assembly’s Committee on Economic and Financial Affairs, discussed this issue with the newspaper Kinh te & Do thi (Economic & Urban).

General Secretary To Lam has directed that management of the gold market should shift from a policy of "tightening to control" to one of "opening up to manage", while also demanding an end to the state monopoly on gold bullion to adopt a market-oriented, transparent, and disciplined approach. What are the impacts of the directives from the general secretary and the prime minister on the gold market?

Directives from the General Secretary, the Prime Minister, or the State Bank of Vietnam (SBV)'s intervention often result in sharp, downward corrections in the market following each price surge.

The typical move is the narrowing gap between domestic and international gold prices, from a record difference of VND18 million-VND20 million (US$688-$765) per tael at the beginning of the month to about VND13 million (US$497) per tael by June 10. However, the rates remain far from the prime minister's directive to bring the gap down to 1%-2%. The market remains overheated and is awaiting upcoming policies.

Therefore, Decree 24 issued in 2012, which governs gold trading, must be urgently revised, and the directives of the general secretary and the prime minister must be promptly and seriously enforced.

What are your thoughts on the current supply constraints, such as the unavailability of SJC gold bars and the limited daily supply of gold rings?

The control measures in Decree 24 helped stabilize the gold market for a time. Tightening supplies, maintaining a monopoly on gold bar production, and restricting gold imports kept exchange rates stable and prevented dollarization.

However, this approach has its shortcomings.

The more expensive domestic gold than in foreign markets has led to growing demand for gold in Vietnam, increasing the risk of speculation and smuggling, putting pressure on trade balances and foreign exchange reserves.

The imbalance between supply and demand is a major reason why domestic gold prices remain high. Gold supplies have declined because SJC bars are no longer produced.

On the demand side, ordinary buyers often act on market sentiment due to a lack of accurate market information. Demand from gold trading firms is another overlooked factor.

Currently, there is no official data on these companies since most are not publicly listed and do not release financial reports. Nevertheless, tax authorities can estimate the volume of gold that major brands have stockpiled in recent years.

To effectively intervene, the SBV must reduce the speculative demand for gold from these companies, as they possess significant financial capacity for speculation.

What is your view on the government’s directive to revise Decree 24, and public expectations that the amendment will stabilize the gold market?

The government and the SBV acknowledge the need to revise Decree 24. It is now time for a fundamental restructuring of the gold market to increase supply and reduce demand.

The central bank should not remain the only supplier of SJC gold bars for production, while trading companies should be allowed to produce bars from their own legally sourced gold to boost liquidity.

It is necessary to eliminate monopolies, issue gold credits, and develop a modern gold exchange to better control and mobilize dormant public resources.

Authorities must enhance inspection, strictly handle smuggling, manipulation, hoarding, and market disruption. Building a national gold data system is also critical, including linking physical gold transactions and enabling traceability.

What about creating a national gold exchange and relaxing, under control, the import of gold?

Controlled relaxation of gold imports can increase the supply, ease domestic price pressure, and reduce smuggling through unofficial channels. However, it must be carefully regulated due to its impact on foreign currency reserves.

The government should issue import quotas based on public and transparent criteria regarding quantity and eligible entities. They should also strictly supervise the process to prevent abuse of the policy for speculative purposes.

A national gold exchange would provide a transparent platform for transactions and information. It would also counteract the growing trend of holding physical gold by offering a safer, more transparent alternative.

Currently, many gold investors are speculators. The exchange would partly satisfy their demand for profiting from price differences, while reducing the need for actual delivery of physical gold.

Building a gold exchange must be done cautiously and in steps. It must be transparent, ensure traceability, and avoid becoming a "virtual gold exchange," which leads to gold price manipulation, like before. The process should begin with the development of a sound legal framework for a modern, transparent, and stable gold market.

Authorities should collaborate closely to establish regulations for gold trading and define quality standards, custody and settlement rules, and mechanisms to prevent money laundering, speculation, and price manipulation.

A pilot program should be launched through select major financial institutions under the close supervision of the SBV and relevant agencies.

What is your opinion on taxing gold?

It is time to start taxing gold buyers. Real estate trading and stock investments are already taxed in Vietnam, so there is no reason to exclude gold.

Taxing gold transactions aligns with global market trends, as many countries already tax gold products. The key questions are how and at what rate the tax should be levied.

Two options are possible: a tax on revenue or a tax on profit.

Currently, most people buy gold from small vendors without invoices or documentation. Some bought gold long ago and are selling it now, which makes it difficult to determine the original purchase price or calculate the profit for tax purposes.

This challenge must be addressed. The most important outcome of taxing gold is increased transaction transparency, which helps identify buyers, sellers, and transaction volumes.

This would help curb illegal activities and money laundering. When combined with other tools, taxation would improve the SBV’s ability to manage the gold market.

What solutions could tap into the potential of the gold held by the population?

Under current conditions, people should exercise extreme caution, as gold prices are highly volatile, and the price gap between buying and selling, as well as between domestic and global prices, remains wide.

Particular caution is advised for black market and online transactions, as there is a risk of receiving counterfeit or low-quality gold and of committing legal violations.

Mobilizing gold resources from the public requires long-term efforts to change public awareness and investment habits, in addition to aligning domestic gold prices with global ones and developing the gold exchange or gold credit systems.

At the same time, it is essential to promote macroeconomic stability, preserve the value of the Vietnamese dong, and stimulate production and business activities to reduce reliance on gold as a haven.

Thank you for your time!