Nevertheless, from late September 2010, dollar supply from gold export has fallen off, since domestic gold price is higher than the global price. Dollar price has quickly exceeded the ceiling level of 19,500 dong per dollar. Dollar on interbank and free markets is sold at nearly 300 dong higher than the ceiling price.

Banks started selling dollars at above the ceiling level to businesses in the form of charging additional costs. Liquidity on foreign currency market has gone down when the trading volume is moderately at dozens of million dollars daily. Meanwhile, the foreign currency status of entire banking system is about $300 to 400 million in positive. According to an expert in this field, the psychology to wait for US dollar price to rise and the increase in foreign currency demand to import gold have led dollar price to rise sharply in the early days of October, ranging from 19,860 to 19,930 dong per dollar.

Since the gold import quota of three tonnes was valid in three working days only (while October 11 was holiday of the US market, so importers could only import gold from the afternoon of October 7 to the end of October 8), it has not resolved the basic problem of the market supply and demand. Including the amount of gold imported by Saigon Jewellery Company Limited (SJC) in early 2010, the country has imported about nine tonnes of gold, while the volume of gold exported was almost 100 tonnes.

In addition, the global gold price is predicted to continue going up. Large organisations around the world have forecasted gold price would reach $1,400 dollars per ounce in the fourth quarter. That has led the demand for speculative buying to increase. Those price fevers in the recent time would likely to recur in the near future. Therefore, the solution to give small volume quota for each import time in a short time would only temporarily make the dollar and gold markets to be less tense.

Compared to the beginning of the year, dollar price at banks has currently risen up by 5.6 percent, but compared to the same period of 2009, it has increased by 9.2 percent. The psychology to speculatively buy dollars, and rumours that SBV might increase the exchange rate by two to three percent have made many businesses and people to have the psychology of holding foreign currencies. At the same time, banks have raised dollar deposit rates to about five percent per annum while dong deposit rates tend to fall down, people thus tend to keep more gold and foreign currencies.

Since domestic gold price is converted from US dollars, the fluctuation of dollar price would also affect gold price.

Thanh Nien - October 12, 2010