More gold in the market brings down prices

February 6, 2010

Gold prices plunged Thursday after the central bank said it would ask the country’s largest gold trader to sell more gold in the market.

The State Bank of Vietnam said in a statement on its website that although the local gold market has stayed calm recently, gold prices onshore were still high compared to the global market.

“The central bank will ask Saigon Jewelry Holding Company (SJC) to sell more gold in the market to soon bring local gold prices to the same level as global prices,” the statement said. “The central bank will also take other measures necessary to stabilize the price of gold.”

The precious metal lost VND1.43 million per tael on Thursday after staying over VND26.4 million the past few days. A tael is equal to 37.5 grams.

An SJC representative told Thanh Nien the Ho Chi Minh City-based gold trader, the largest in Vietnam, started increasing its gold sales Thursday. It sold 28,000 taels in the market, five times higher than the figure on Wednesday, while purchasing just 5,000 taels.

Nguyen Thi Cuc, deputy general director of Phu Nhuan Jewelry, said the company sold 2,700 taels Thursday, a 50 percent increase from its normal sales.

The Vietnam Economic Times said in a report that some large commercial banks were also asked by the central bank to raise their gold sales.

Dang Van Thanh, chairman of Sacombank, said the lender has prepared up to three tons of gold to help stabilize the market.

Traders said the government intervention has proved effective immediately. Many investors were caught off guard Thursday, losing huge money in just a few hours.

Ton The Quyen, sales manager of Sacombank, said investors should not buy gold right now as selling pressure on the market is really strong.

Cuc said it’s hard to predict how low gold prices would fall because the precious metal is also on a declining trend in the global market.

Still, Thursday’s close price of VND25 million (US$1,353) per tael, equivalent to $1,127 an ounce, was still higher than world prices. The metal fell to a three-month low in London as the dollar’s rally cut bullion’s appeal as an alternative investment. Gold for immediate delivery fell as much as $14.13, or 1.3 percent, to $1,049.57 an ounce.

Source: Thanh Nien, Agencies

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