A golden proposal to stabilise market

Nguyen Thanh Truc

The trading of gold plates will gradually be abolished. But, people will still be allowed to transact gold at some locations licenced by the State Bank. Is this feasible to put the gold market into order?

Gold plates are not a standard concept. Gold plates can now be processed into sheet gold or jewels just after five minutes. That concept is not used in other countries, instead they call high-purity or high-content gold for 99.99 or 99.9 per cent gold purity.

Governing Vietnam’s bullion market should have been to control gold trading businesses, but not referring to people’s trading practices.

The governments in many countries around the world restrict high-purity gold trading through regulating that only particular jewel shops are eligible to sell such kind of gold.

A tremendous gold volume is kept in the community. What should we do to put this huge gold volume into economic development?

Around 500 tonnes of gold (equal to $25 billion) is estimated to be kept in the community.

In my view, there are two options for raising gold from the community to put into economic development which are safe to use.

The first and most simple way is that commercial banks raise gold from residents, then use it as collateral at foreign banks to borrow US dollars.

I asked some foreign banks in Vietnam which agreed to gold as a mortgage to lend us dollars. For example, we can borrow $4 billion by mortgaging 100 tonnes of gold (around $5 billion) at foreign banks.

The second way is like what we used in the 2007-2008 when gold import and accounts-based gold trading were still eligible in Vietnam. Particularly, at times when the price of gold in the domestic market was lower than that in the world market we allowed certain gold exports, we then procured beforehand the same gold volume with a 7 per cent down payment only. We later paid all the money and brought gold home when it was important.

We voiced these proposals to relevant management authorities and awaited their consideration.

How can the local bullion market be stabilised besides these proposals?

I think the gold export duty should be eased. The current 10 per cent export tariff is deemed as irrational as the higher the export duty the bigger possibility for gold smuggling.

Vietnam Gold Traders Association has contacted with the World Gold Council which expressed goodwill to sit with us discussing how to restore order in Vietnam’s bullion market.