HANOI(BullionStreet): Vietnam claims it's recent market interventions including an auction to sell gold at lower prices were resulted in narrowing the gap between domestic and global gold price.

Country's central bank, SBV said gold prices have fallen down significantly in Vietnam this week after it's announcement regarding further bullion gold tenders.

Average gap between domestic and the world price dropped from VND5 million per tael to VND2.8 million after the announcement.

Some analysts however said recent price cuts were not because of the new policy as it has been on the decrease, now staying at the 6-month deepest low. And though the gap has been narrowed, the domestic price is still sky high.

They added that any future changes in gold prices depends on the amount of gold the State Bank would put into circulation and the people’s confidence on the bank’s policies.

SBV governor of the State Bank Nguyen Van Binh once said that the price gap of VND400,000 per tael would be the ideal scenario. As such, the current gap of VND3 million per tael means that Vietnamese have been overcharged.

The State Bank of Vietnam has affirmed that the gold reserves are big enough to intervene in the market when necessary.

However, analysts said worries still exist that if the State Bank is capable enough to stabilize the market for a long term.

In the past, the State Bank once set up G5+1 group, in charge of selling gold to intervene in the market. However, the group failed to fulfill the task because of the overly high demand and the limited supply.

In principle, nowadays, when the State Bank holds the monopoly in the bullion gold market, it can have bigger power to intervene in the market. However, this does not mean that the State Bank would be able to import gold as much as it wants, because the gold imports would affect the macro economy, foreign currency reserves, and the dong/dollar exchange rate.

Meanwhile, the gold demand is still high, because they feel the uncertainties of the national economy and they tend to keep gold instead of cash.

Experts believe that in the immediate time, the drastic measures taken by the State Bank would help force the domestic price down and come closer to the world price. However, no one can say for sure if the State Bank is capable enough to keep the market stable for a long time.