VINACHEM

Local gold prices increased by 0.2 per cent yesterday to touch VND36.55 million per tael (US$1,732), driven by a strong surge in world gold prices on Monday.

The price fell afterward to as low as VND36.46 million ($1,727) per tael for an SJC gold bar in the late afternoon trading session. Last Monday, local gold prices reached a new high of VND36.80 million ($1,744), the highest since last November.

After it reached the record price of $1,338.6 per ounce on Monday, gold fell marginally to $1,332.8 yesterday but remained steady at an almost four-month high due to China's growth. One tael is equivalent to 1.2 ounces.

Last year, the State Bank of Viet Nam managed gold prices by auctioning material gold. The central bank announced that it will continue to sell gold this year to further stabilise the domestic market and address imbalances between supply and demand. However, so far this year, the central bank hasn't auctioned any gold.

Market observers argue that gold auctions are a reasonable tool to manage the local gold market if needed, but they do not think it should be used in the long term.

"When the central bank holds gold auctions, it also needs a strong source of foreign currencies, particularly of the US dollar, to import gold bars, which consequently influences the balance of payments and foreign reserves," a banking-finance expert said.

He recommended that the central bank allow local gold prices to move in tandem with world gold prices to prevent speculation or smuggling, which did occur in the market.

Economist Vu Dinh Anh remarked that the central bank and the Ministry of Finance should collaborate to efficiently tax the precious metal.

The US dollar traded at VND21,085-VND21,125 against the Vietnamese currency, yesterday.