Saigon Jewelry Co employees stamp gold bullion. The State Bank of Viet Nam expected to sell a record 52,000 gold taels at yesterday's auction. But one-quarter remained unsold. — VNA/VNS Photo Hoang Hai

HA NOI (VNS) — After four successful gold bar auctions in a row, the State Bank of Viet Nam expected to sell a record 52,000 gold taels (approximately two tonnes) at yesterday's auction. But one-quarter remained unsold.

SBV announced that 40,000 gold taels were sold yesterday to 13 out of 22 participants for VND42.98 million per tael at the highest price and VND42.97 million per tael at the lowest price. Most buyers purchased gold at the floor price of VND42.97 million.

The largest purchase was 10,000 taels while the smallest was 1,000 taels. Each bidder was allowed to bid for at least 10 lots and at most 100 lots (one lot included 100 taels of SJC gold).

There was a significantly higher volume of gold offered yesterday than at previous auctions. In the first four auctions, the central bank only aimed to sell 26,000 taels, while the volume sold at the fifth auction was 40,000 taels.

A SBV representative said that the central bank increased the volume of gold on offer in order to meet expected demand. In Wednesday's auction, demand was roughly 700 taels higher than supply.

Yesterday's auction was not as successful as expected because the floor price – only about VND30,000 lower than the market price –was not attractive enough, said a participant in yesterday's auction who declined to give his name.

Auctions might also be held too frequently, he added. Since his company had not yet consumed the gold it had bought at the previous auctions, it did not plan to make any purchases unless the gold was cheap.

The central bank will hold another three auctions next week.

SBV said that the auctions aimed to increase supply in the domestic market to gradually balance local supply and demand.

"The domestic gold market became more stable in the past few weeks as the difference between the selling and buying price in the domestic market went below VND100,000 per tael. The gap between domestic and global gold prices is also gradually shrinking," SBV said in a statement.

However, experts said that it would be difficult for the central bank to shrink this disparity.

Yesterday morning, Saigon Jewelry Co Ltd posted its trading price as VND42.88/43.02 million per tael, but the price increased to VND42.9/43 million late in the day. A gold tael in the domestic market still costs roughly VND3.5 million more than in the global market.

General director of the Viet Nam Gold Business and Investment Co Tran Thanh Hai said that the central bank's goal of making the gold price in the domestic market equal the price in the global market was not feasible.

Hai said that the central bank did not sell gold directly on the market, but released it through banks and gold trading companies, so no one could control whether the gold bought from the central bank was traded on the market.

Domestic commercial banks, which are due to close all gold accounts by June 2013, were the main buyers of gold bars at the auctions. An unnamed representative from the central bank said at the end of last October that banks still needed around 20 tonnes of gold to finalise all their accounts.

Since the central bank could not intervene in the local gold market through the auctions, as the global gold price was volatile, Hai suggested that the central bank set up a gold exchange to stabilise the local gold market in the long term.

The central bank could not sell gold forever, as the source of gold for the auctions was the national reserve, Hai said, so gold exchanges would provide a way to balance supply and demand.

He recommended that the central bank intervene in the market only when there was an imbalance between supply and demand. — VNS