Customers buy gold at Kim Dung Thong gold shop in the central province of Nghe An’s Vinh city. (Source: VNA)

Hanoi (VNA) - Transactions in the domestic gold bar market dropped sharply as many gold holders selling their precious metal for VND to reinvest in business, production and consumption.

According to the State Bank of Vietnam (SBV)’s Foreign Exchange Management Department, as local appetite for the precious metal has been declined sharply with only some 10,000 taels (a tael equal to 37.5g) of gold to be traded per day on average, down as much as 75 percent compared with 2013.

Despite the sharp price hike in the global gold market in the wake of a series of world events leading to volatility, such as tensions on the Korean peninsula, the domestic gold market has remained stable.

Nguyen Ngoc Canh, director of the department, said that it is quite a contrast to the situation prior to 2013 when the domestic gold market often experienced chaos as the global gold price rocketed. At that time, it was common to see locals queued up in front of gold shops, patiently waiting for their turn to enter and buy the precious metal for speculation.

This changed when the SBV removed the regulation on allowing commercial banks to deposit and lend gold in 2013. Instead, gold holders now have to pay fees to commercial banks if they want to use the custody service to store their gold at banks.

Thanks to the policy, there is no longer any turbulence in the domestic gold market despite a sharp change in price in the global market.

Statistics from the department revealed that the quantity of gold under custody at commercial banks reduced sharply to only 2.89 tonnes by June 31 this year, compared with 32 tonnes in 2013, 21 tonnes in 2014, 10 tonnes in 2015 and three tonnes in 2016.

The department attributed the downward trend to gold holders selling gold for VND to reinvest in production, business and consumption.

Given lower demand for gold, the SBV has not had to import any gold bar since 2013.

On September 14, SJC-branded gold was trading at 36.5 million VND and 36.7 million VND (1,607-1,616 USD) per tael for buying and selling, respectively, down roughly 100,000 VND against the previous day.

The gap between Vietnamese and global gold prices is standing at 100,000 VND per tael, shrinking significantly from millions of VND few years ago.-VNA