Gold bars are counted before given to a customer at a gold shop in Hanoi. The Central Bank of Vietnam has been grilled for appointing Saigon Jewelry Company Ltd. its official gold producer, allowing the monopoly of gold market.
After being appointed the sole official gold producer of the Central Bank of Vietnam despite objections from economists and the public, Saigon Jewelry Company Ltd. (SJC) has proceeded to the next logical step of being a monopoly: manipulating the market.
Between December 25 and 27, the producer and also the country's largest gold trader, reduced its buying price by up to VND1 million (US$48) per tael (a tael is equal to 1.2 ounces of gold), and did not change its selling price much, achieving a record disparity of some VND700,000 per tael.
For ordinary people, the difference means that they have to buy gold at a high price and sell it at a lower price, accepting a loss.
This is not mention the fact that since SJC was named the official gold producer in May, "accidentally" making non-SJC bullion unacceptable or cheaper in gold shops, people who had been keeping non-SJC bullion have rushed to convert them
into SJC bullion paying a fee
for the conversion. This means they will lose more when selling the converted bullion.
Even though a representative of the gold producer claimed later that the latest price adjustment was needed to reduce "risks" as people are selling more than buying gold, the explanation makes no sense.
Under market rules, when demand is low, prices fall in an effort to boost sales. Therefore, SJC should have, logically, lowered its selling price.
In fact, SJC has more reasons to reduce its selling price. Economists have said that the reason people are selling
gold bullion they are holding because they are concerned about risks implied by the large gap between domestic price and the world prices. The SJC's selling price was nearly VND4.5 million higher per tael than that of the world market between December 25 and 27.
However, the company still chose to decrease its buying price instead, because it was able to not only discourage people from selling their gold, but also earn profit from the significant difference between the selling and buying prices.
What is the next step for this monopoly?
Once SJC's gold completely takes over the market, it will freely adjust prices. It will probably explain then that its supply cannot meet the demand. Whether the explanation is true or not, no one knows, because the state bank has said nothing about its production capacity when making the appointment.
All these manipulations of the market will have one definite consequence: the people will bitterly see their money being pocketed without doing anything about it.
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