Exchange to end gold market woes

The National Financial Supervisory Commission is backing a national gold exchange proposal to stabilise the local gold market.

Commission vice chairman Le Xuan Nghia said the proposal would help Vietnam prevent a medium-term monetary system crisis by bringing the domestic gold market in line with global market movements.

The proposal that BIDV submitted to the prime minister in early December pushes for a working group to study the establishment of the national gold exchange in Vietnam.

“The government has not given any response to the issue. However, the commission supports this proposal,” Nghia told VIR.

The proposal stems from the great demand in Vietnam to trade gold, despite there being no operating exchanges to conduct transactions since the government banned local banks’ gold exchanges from early 2009.

The Global Gold Council reported that Vietnam imported 1,072.1 tonnes of gold in 2010, equivalent to $47 billion. The country is one of top 10 countries with largest gold reserves, but the assets are mostly kept at people’s homes.

The disconnection between Vietnam and world gold market has led to illegal smuggling. The illegal imports also affected to the country’s balance of payments as there was an estimated $12.8 billion used for illegal gold imports in 2009.

“After analysing, we found out that around $12.8 billion disappeared from the official market and banking system, going to pay for illegal gold imports in 2009. That is a big problem for the monetary system.

“The future national gold exchange will enable local residents and organisations to conduct transactions in Vietnam. It will stop them illegally conducting transactions through overseas accounts and absorbing a large amount of gold savings held by local residents at home into the banking systems,” said Nghia.

Nghia suggested that the national gold exchange could operate as one-member limited liability under the central bank’s supervision and have two bourses in Hanoi and Ho Chi Minh City conducting transactions through gold deposit certificates.

A BIDV official said a national gold exchange would minimise risks for gold investors.