Domestic gold prices have been skyrocketing due to scarcity, though the State Bank of Vietnam has ordered Saigon Jewelry Co. (SJC) to process more than 1.7 tons of gold for local supply.

Many experts say that the gold licensed to Saigon Jewelry Co., which was to be refined and reprocessed for local supply, has yet to be channeled to the appropriate place.

Real buyers

On late Thursday afternoon, world gold prices were at over $ 1,710 an ounce, pulling local gold prices up every hour.

At 3:18 p.m., SJC gold bullion was sold at VND46.15 million a tael, rising VND870,000 a tael day on day.

However, by the end of the day, the world gold price saw a minor reversal, whereas the domestic gold price was reduced by only VND50,000 per tael compared to its previous peak of VND46.1 million a tael.

The owner of a gold shop in Ho Chi Minh City’s District 8 said many people brought money to the store to buy, but high prices prevented them from doing so. The same situation happened to others who brought gold to the store for sale, but chose to wait for prices to rise further.

Another owner of a gold shop on Le Thanh Ton Street, District 1, said surging gold prices, plus information that domestic gold prices are VND3 million a tael more expensive than their world counterparts, has put a halt to trading.

Local gold supply is not so scarce, and the shop can still sell some tens of taels to an individual buyer. The greatest concern for gold shops is to rebalance their stocks after selling.

Meanwhile, SJC, the biggest local gold supplier with 90 percent of the market share, sold some 5,500 taels of gold bullion, while buying some 4,500 taels of gold from local residents on Thursday, said Nguyen Cong Tuong, deputy head of SJC sales department.

The buyers are both local people and organizations.

Who really needs gold?

A leader of a gold company told Tuoi Tre that the firm continued to receive phone calls from large dealers demanding SJC gold bullion. The agents said they collected gold for sale to local banks.

As the gold bullion gathered from small dealers is not enough, large dealers have to knock on the doors of bigger firms, he said.

However, the source said SJC gold bullion is very scarce on the market, so the firm’s supply now only meets the needs of small buyers.

The leader also confirmed with Tuoi Tre that the people's demand for gold bullion is not high, as his company only sells a few hundred taels a day. The need for sale is bigger because people want to take advantage of rising gold prices to get rid of non-SJC gold bullion.

Tran Thanh Hai, General Director of Vietnam Gold Investment and Trade Co., told Tuoi Tre that the reason for domestic gold prices constantly increasing faster than the world gold price is due to the demand to cut losses from local banks.

Three months ago, when the gold price stood at VND41 million a tael, many banks started to turn gold bullion deposited by local residents to Vietnam dong to enjoy the difference in interest rates.

However, since late August, the price of gold has increased by some 11.2 percent, forcing banks to buy quickly in order to cut losses, Hai added.

The purchase of gold is also intended to meet the needs of payment for people who have deposited their gold bullion in banks. They withdraw the gold bullion from the bank as their gold depositing contracts mature, or take them out for sale before the contracts come to term.

The actions of local banks show that the 1.7 tons of reprocessed gold have mostly been channeled into banks to rebalance their liquidity, Hai added.

Nguyen Hoang Minh, deputy director of the the HCMC branch of SBV, said the reprocessing of deformed SJC and non-SJC gold bullion finished on Wednesday.

Currently, there are only 1,000-2,000 taels of unqualified gold bullion sourced from non-SJC suppliers.

"SBV has monitored the processing work of SJC very closely," Minh said.

Many gold companies also questioned when the SJC was allowed to reprocess more than 800kg of gold, equivalent to more than 21,300 taels, much larger than the number of deformed gold bullion previously announced at 5,000 taels, or about 187kg.

Regarding the question, Nguyen Cong Tuong said that in addition to the 5,000 taels of SJC deformed gold bullion, SJC also worked on the gold bullion of other brands that the company had previously purchased.

"All the reprocessed gold bullion has been sold, and we have no comment on whether that gold bullion has been bought by the banks or not, because the banks can buy through intermediaries," Tuong said.