Why central bank’s gold auction failed to attract bidders

By Quynh Trang, Minh Tuan   April 23, 2024 | 11:34 pm PT
Why central bank’s gold auction failed to attract bidders
SJC gold bars at at a shop in Ho Chi Minh City. Photo by VnExpress/Quynh Tran
Over 13.400 taels of gold bullion went unsold in the State Bank of Vietnam’s auction on Tuesday morning, with businesses seemingly considering the floor price unappealing.

Only two out of 11 participants made bids and bought 3,400 taels at the central bank’s first gold auction in 11 years. A tael equals 37.5 grams or 1.2 ounces.

Seeing that the global gold prices had plunged the night before, participants were expecting the reserve price to be much lower than the VND80.7 million (US$3,170.9) per tael previously announced.

But they were in for a shock: The floor was set at VND81.3 million, VND1 million more than Saigon Jewelry Company’s bullion retail buying price that morning.

Business representatives had 30 minutes to decide whether they wanted to place a bid as they frantically called their firms to discuss the price.

Buying at such a price while global prices are declining had little appeal and so most refrained from bidding.

Private lender TPBank, which had received permission to join the bidding but chose not to, said it found the reference price "unappealing."

Some were also concerned about the slowing demand for the precious metal.

Buyers are waiting and watching after prices ran up relentlessly in recent weeks, a former director of a gold trading business said.

Even people who are still prefer buying 24K gold rings to bullion, he noted.

Another reason that kept businesses out of the auction was the high minimum bid of 1,400 taels, he said.

"Given the risks and low profit margin, it is understandable that participants were hesitant."

Analysts said the auction failed to attract businesses because the central bank was trying to profit from it like an enterprise rather than fulfilling its role as a regulator though it has zero risk in holding it.

"The central bank should learn from this and lower its minimum price, especially when global prices are decreasing," a spokesperson for the Vietnam Gold Trading Association said.

If the central bank wants to achieve its goal of narrowing the gap between domestic and global prices, it needs to sell bullion at lower than domestic prices, the representative said.

The auction was initially planned for Monday but was postponed due to low participation.

After the auction ended bullion prices jumped by 1.2% to VND83.3 million.

This is around VND12.5 million per tael higher than the global price, while the difference was VND11 million in the morning.

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