Domestic gold savings to be tapped

September 01, 2011 | 10:08

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The State Bank of Vietnam (SBV) is mulling over a plan to attract and utilise gold accumulated in domestic savings in order to bolster national foreign currency reserve.

Vietnamese are currently hoarding 300-500 tonnes of gold

>> Central bank frees up gold imports

Truong Van Phuoc, former Director of the SBV’s Department of Foreign Currency, said that banks had previously accessed 130 tonnes of the precious metal that is often accumulated by Vietnamese as a form of saving. The SBV estimates that between 300 and 500 tonnes of gold may be held in domestic savings.

From May 1 this year, the SBV requested an end to gold lending and the gradual reduction in gold savings by May 1, 2013, he shared.

In order to take advantage of this untapped source of capital, the SBV is considering allowing banks to spur gold buying in the time to come. However, banks would neither be allowed to provide lending in gold nor convert it into VND, but instead deposit it at the state bank.

In order to do that, commercial banks may be allowed to issue bonds and bills in gold in a bid to increase gold deposits. The SBV will borrow against the gold reserves from commercial banks via the issuances of treasury bills.

The SBV may exchange half of the gold saved to buy in order to boost the national foreign currency reserve.

With domestic gold prices much higher than global prices, the SBV may sell their remaining gold to boost domestic supply. This is expected to help cool the domestic market and save dollars that should be used for gold imports, he explained.

Those who buy bonds in gold may be allowed to take back their gold before the terms. They may be also allowed to mortgage and redeem their bonds for gold.

Tuoi Tre

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