In recent years, Vietnam’s gold market has been characterized by long queues outside gold shops, with anxious customers glued to fluctuating digital price boards. Each surge in gold prices has sent ripples of alarm through the public, highlighting the market’s volatility and the pressing need for reform. The ongoing revision of Decree 24 aims to address these long-standing distortions, signaling a pivotal moment for the future of gold trading in Vietnam.
The Monopoly and Its Consequences
For over a decade, the State Bank of Vietnam (SBV) has maintained a monopoly on gold bar production, designating the Saigon Jewelry Company (SJC) as the national brand. This monopoly has led to significant inefficiencies, with domestic gold prices consistently exceeding international prices by $400 to $900 per tael, peaking at over $1,000 in May 2024. The restrictions imposed by Decree 24 have resulted in a dramatic reduction of the gold retail network, shrinking from over 12,000 outlets to approximately 2,600 today.
The lack of competition has fueled speculation and market anxiety, leading consumers to hoard gold as a safeguard against price fluctuations. The upcoming regulatory changes are expected to ease supply bottlenecks and foster a more competitive environment, ultimately benefiting consumers.
Ending the Monopoly: A Step Forward
The draft amendment to Decree 24 proposes to end the monopoly on gold bar production, allowing other brands that meet specific conditions to manufacture gold bars. This change is a positive signal for market reform, as it provides consumers with more choices and encourages fair competition. However, the challenge lies not only in opening the market but also in ensuring that it is done transparently to prevent new interest groups from manipulating prices behind closed doors.
Dao Xuan Tuan, Director of the Foreign Exchange Management Department at the SBV, has confirmed that the draft amendment is complete. The new regulations will require firms to have a charter capital of at least VND 1 trillion ($39 million) and banks to hold at least VND 50 trillion ($1.95 billion) to enter the gold bar market. This stringent requirement aims to ensure that only serious players can participate, thereby maintaining market integrity.
The Need for Transparency
While the proposed changes are promising, concerns remain about the potential for a new oligopoly to emerge. With SJC currently commanding 95% of the market, new entrants face significant hurdles in gaining public trust and market share. The SBV’s proposal to allow “a few” entities to import gold raises questions about the criteria for selection and the risk of price manipulation if only a handful of companies are granted import rights.
To avoid repeating past mistakes, a transparent oversight mechanism must be established. This would cover import quotas, pricing, and distribution channels, allowing regulatory agencies to intervene if unusual pricing behavior arises. A healthy market must be built on law and oversight, rather than trust alone.
Addressing Market Instability
Concerns about market instability are valid, especially given the misconduct observed in the gold market even under strict regulations. Recent inspections by the SBV uncovered serious violations at several major banks and enterprises, including SJC, DOJI, and PNJ. These violations included price manipulation, unlicensed online trading, and breaches of anti-money laundering regulations.
To mitigate these risks, the SBV must implement a quota system for gold imports that aligns with balance-of-payment surpluses. This approach would allow for managed forex exposure and rate stability, reducing the likelihood of market distortions.
A New Trading Model
Economist Dr. Le Xuan Nghia has suggested adopting a physical gold trading platform model, where licensed banks and firms could list gold for inter-organizational trading, excluding retail transactions. This model would connect domestic and global gold prices, reduce irrational spreads, and curb price manipulation by major players. By monitoring foreign currency flows and gold import volumes more effectively, the SBV can ensure a more stable market environment.
The Role of Public Perception
Beyond regulatory changes, it is crucial to address the public’s perception of gold as a safe investment. Surging gold prices often reflect a lack of attractive investment channels, leaving gold as a “lifeline” for household savings. Policymakers must enhance communication to help the public understand that gold is not a stable, long-term investment.
Conclusion
The ongoing reforms in Vietnam’s gold market represent a significant step toward transparency and competition. By ending the monopoly on gold bar production and implementing stringent regulations, the government aims to create a fairer market environment. However, achieving these goals will require vigilance to prevent new forms of manipulation and to ensure that the market operates efficiently. Ultimately, the success of these reforms will depend on a commitment to transparency and a robust regulatory framework, allowing consumers to navigate the gold market with confidence.
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