Gold centre may save market from chaos

Clients shop for gold at a jewellery shop of Bao Tin Minh Chau Co in Ha Noi. Domestic gold prices yesterday fell by VND300,000-400,000 ($14.28-19.05) per tael.

Tran Trong Quoc Khanh, director of Asia Commercial Bank's gold centre suggested that: "Along with the establishment of a trading centre, the government should set up gold purity assessment centre, list criteria for gold bullion, total up the accumulated volume of gold and enforce improved gold import-export management."

The suggestions were the results of a gold market seminar on Tuesday - the same day the Prime Minister Nguyen Tan Dung confirmed the gradual elimination of gold bar trading on the unofficial market.

The government believed that the abolishment of unofficial gold trading was a key measure to ensure macroeconomic development in the context of high inflation and deep-seated economic imbalances. Inflation quickened to a two-year high in February. Prices rose 12.31 per cent from a year earlier, compared with 12.17 per cent in January, according to the General Statistics Office. That was the highest increase since February 2009.

"However, it's very difficult to ban trading of such a unique product," Nguyen Thanh Truc, general director of Viet Nam Agribank Gold Joint Stock Company (AJC), one of the country's biggest gold traders, told the seminar. "The buying and saving of gold is as familiar to Vietnamese people as eating and drinking. If gold bar trading is banned, people may switch to trade gold beads or gold powder."

Phi Dang Minh from Viet Nam Banks Association said the demand for gold was likely to increase due to serious concerns about rising inflation, political instability in Libya and the earthquake and tsunami in Japan.

Other representatives from gold companies, banks and the Market and Price Research Institute agreed that the Government should lay out a framework to manage gold bar trading instead of banning the trade entirely.

Besides the proposed gold trading centre, some market watchers also suggested tightening gold imports and the business of eight gold bullion processors, along with the issuing of gold deposit certificates.

Vietnam does not have any official statistics regarding the total amount of gold hoarded by the population, but market data seems to imply a huge amount of gold is currently being held in private hands as a form of savings.

Sai Gon Jewellery Holding Company (SJC) reported that from 1994 until April 2008, the company had produced 10 million taels of gold bars totalling $10.6 billion (based on the 2008 exchange rate). One tael equals to 1.2 ounces.

According to the General Department of Vietnam Customs and the State Bank of Vietnam, from 1998 until September 2010, the country had imported 339.86 tonnes of tonnes and exported just 268.86 tonnes.

In 2008, when the country's annual inflation reached 23 per cent, Vietnam became the world's largest importer of gold.

However, Vietnam does not have a full legal corridor for controlling trade in gold bullion on the free market despite the country having more than 10,000 traders, most of which deal in gold bars.

The State Bank of Vietnam has been told to outline a draft plan for gold market regulation by June this year.

Domestic gold prices yesterday lost VND300,000-400,000 ($14.28-19.05) per tael. Gold dealers like Saigon Jewellery Holdings JSC (SJC), Phu Nhuan Jewellery JSC (PNJ), Agribank Jewellery Co (AJC) and Sacombank Jewellery JSC (SBJ) quoted buy/sell prices at VND36.74-36.9 million ($1,749-1,757) per tael.

The domestic slump followed the downward trend of global gold price to a one-month-low of $1,380 an ounce on Tuesday. However, global gold regained $2.75 an ounce yesterday to reach to $1,396.7 an ounce.