All that glitters is not gold

Under Decree 24 on gold business management the state will hold a monopoly in gold bar production and trading and is committed to turning SJC gold bars into national gold brand. SJC gold currently holds over 90 per cent domestic bullion market share.

Also in light of Decree 24, non-SJC gold bars whose production was formerly licenced by the State Bank are still eligible for circulating and trading in the market.

However, in fact the government’s commitment to turn SJC into national gold brand has wobbled non-SJC gold bar holders. Many of them accepted to sell non-SJC gold bars at  lower than regulated prices to shift into hoarding SJC gold bars.

Vietnam Gold Business Association general secretary Dinh Nho Bang cited the ‘psychology’ and policy factors as core reasons behind the situation.

“People do not want to hold non-SJC gold bars after the state declared to turn SJC into national gold brand. Besides, lack of a clear plan on how to shift non-SJC gold into SJC gold bars made people confused,” said Bang, adding that there needed to be a clear trajectory in shifting non-SJC into SJC gold bars.

Bang assumed the State Bank buying non-SJC gold bars at suitable rates to turn them into SJC gold bars would be a wide option. The rate would be set based on that of SJC gold bar plus some kinds of fees such as processing and transportation fees.

“Buying back non-SJC gold bars will help raise national gold reserves. Besides, buying gold from the community for SJC gold production will save Vietnam cost in importing material gold for production needs,”  said Bang.

State Bank deputy governor Dao Minh Tu unveiled central bank was in the process of penning a plan on shifting non-SJC into SJC gold bars in the spirit of not causing a chaos in the market  or hurting people’s interests.

Some commercial banks will reportedly act as intermediaries in the conversion process. The State Bank will step-by-step take back non-SJC to replace by SJC gold.

“Gold conversion will be like polymer note conversion in the past years. Both SJC and non SJC gold is protected by the law. Hence, people in need may come to banks for gold conversion at any time in the near future,” Tu said.

The gold conversion plan is under development and will soon be enacted. The State Bank supposed the conversion process would not be costly as the amount of non-SJC gold in circulation in the market is insignificant.

Gold bar traders estimate there have been around 22 million gold bars made by eight local firms currently in circulation in the market. Of them, 20 million are SJC gold bars, the remainder is gold bars produced by seven other firms.