The State Bank of Vietnam has said it will not hold any further gold auctions. Instead, it has said that it will introduce a ‘new strategy’ to try and ‘stabilise’ the local gold price. This is expected to be announced on June 3, according to state media.
On the one hand, the State Bank wants to bring down the price of gold which is much higher than the world gold price because there is more demand than there is supply. On the other hand, the State Bank doesn’t want US dollars leaving the country because this creates inflationary pressure on the dong.
On the first policy the bank has tried selling gold from its stash to increase the supply, however, the volumes being added to the market have been too small to make much of a dent in the price–the demand is just too high.
On the second point, the bank has been trying to clamp down on US dollars leaving the country by cracking down on the illegal gold trade. This is reducing the gold supply putting upward pressure on the gold price.
If it sounds like these policies are contradictory then that is because they are. The bank is trying to have its cake and eat it too. With this in mind, it’s not clear how a ‘new strategy’ that doesn’t involve importing more gold might help.