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Vietnam’s gold auction rules change but still not a great investment

The State Bank of Vietnam is still trying to auction off gold to bring down the gold price, despite several failed auctions amid an overheated gold market. This latest gold auction has 16,800 taels of gold up for grabs in lots of 500 taels down from 700 in past auctions, with a minimum of five lots

Furthermore, a reserve price of VND 88 million a piece or about US$2,845.51 per troy ounce has been set. The world gold price as of writing is US$2,338.84 per troy ounce a difference of about US$506 or 18 percent. 

Of note, gold in stores is currently sellling for about VND 89 million per tael. In this context, assuming a firm could off load any gold purchased an auction at the current selling price, they stand to make just VND 1 million per tael or a return of about 1.14 percent.

For context, firms approved to bid in the State Bank’s gold auctions are mostly banks and a handful of gold companies. With gold prices in Vietnam extremely volatile and the returns relatively small, Vietnam’s gold auctions carry a lot of risk. In this context, it’s not clear why financial institutions would consider this investment channel which would explain the myriad of failed gold auctions.

For some background, the gold price in Vietnam is often much higher than the world gold price, due to Decree 24 which, issued in 2011, restricted gold imports and exports to one company that can only do so with permission from the State Bank of Vietnam. Permission to import gold, however, has not been granted for over a decade. This has led to a mismatch in supply and demand pushing up the price.For more information see: The Gold Price in Vietnam: Explained 2024


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