The gap between local and international gold prices has been narrowed down as expected by the State Bank of Vietnam.

The price gap dropped some VND1 million ($47) a tael day on day to some VND4.5 million a tael after the central bank gave a bold forecast about this on the previous day ( 1 tael = 1.2 ounces).

As of 9 am, the bid and ask price of gold bullion produced by Saigon Jewelry Co (SJC) dropped some VND500,000 a tael and VND150,000 a tael day on day to VND36.3 million a tael and VND37 million a tael.

Slowing-down demand for physical gold, stemmed from the fact that many potential local buyers have halted their buying mood in waiting for market response after SBV’s announcement about the shutdown of gold account at local banks on June 30, is considered the main reason for the price drop.

SBV has also held a gold bidding session to sell 40,000 taels of SJC gold bullion at VND36.8 million a tael, about VND200,000 a tael cheaper than the ask price of local gold retailers including SJC.

The 38th bidding session saw all the gold bullion sold to 13 local bidders, mostly authorized banks and dealers, at a ceiling and floor price of VND37.07 million a tael and VND36.72 million a tael, respectively, according to the central bank.

The news that the central banks continued to offer 40,000 taels of SJC gold bullion for bidding has surprised us, according to Maybank Kim Eng Securities Vietnam Co.

“However, we believe that the source of this gold is from the reserves of the central bank instead of direct import," it added.

Globally, spot gold traded in Asian markets this morning reached $1,256 an ounce, up $3.80 day on day following strong gains in the US market.

Earlier, at the US markets, gold prices for August delivery on the Comex trading floor surged $31.50 to $ 1,255.2 an ounce, the biggest increase since April 25, 2013. World gold prices have reached the lowest level in 3 years at $1,179.4 an ounce in June 28 trading session.

The world’s biggest gold fund SPDR Gold Trust yesterday sold 1.2 tons of gold after stopping selling for 3 sessions in a row.

Since early this year, SPDR sold a total of 382.5 tons of gold, reducing its holdings to 968.3 tons.

On Monday morning, local SJC gold prices were quoted at VND36.80 million a tael and VND37.40 million a tael, bringing the price difference between the local and international gold to about VND5.5 million a tael. The world’s spot gold rose $2.5 an ounce to $1,237.8 an ounce after hitting its 34-month low at $1,180 an ounce late last week.

According to Kitco.com, the world gold price has fallen a total of 23 percent in the 2nd quarter of this year, and also the biggest quarterly drop in nearly 100 years.

On the last trading session of last week, local gold price saw its most dramatic decline this year with a VND2 million drop compared to last Thursday’s  closing price to VND34 million a tael, prompting local buyers to rush to their closest gold shops to line up for their turns. Suddenly risen demand for gold lifted the price up by VND1.9 million a tael by the end of the day.