Gold market getting knocked into order

According to State Bank  governor Nguyen Van Giau, the appearance of new kinds of gold trading in the market within the past three years such as gold trading floors, have triggered the strong presence of gold plates.

As a result, gold had gained increasingly popularity as a means of payment in Vietnam despite the State Bank  insisting the dong currency remain the single means of payment in the country.

Also impacting negatively on the market was the ever increasing rise in gold speculation and price manipulation. These were having a big impact on both commodity prices and the Vietnam dong-US dollar exchange rate.

Now the State Bank  has decided to tackle the situation and their first step is to gradually abolish gold plate trading on the ‘free’ market.

“The move will happen in two stages: first by not allowing banks to convert gold into Vietnam dong and then by paring down lending and borrowing in the form of gold,” said Giau.

Giau confirmed, however, that citizens had a legitimate right to keep gold and that State Bank  would launch a ‘suitable roadmap’ to circumvent affecting people’s asset legitimacy and creating confusion in the market.

He added the State Bank  might initially halt the licensing of businesses producing gold plates or not provide additional quotes for gold plate production,

This would probably be followed by the gradual imposition of a ban on gold plate trading in the market, but the State Bank  would still allow people to sell gold to banks to help moderate the gold market and reduce speculation.

But, the State Bank  plans regarding the bullion market have received mixed reviews from industry insiders.

Executives at Agribank Gold Trading Corporation commented that hoarding gold was a time-honoured tradition for Vietnamese people, and that forbidding gold plate trading entirely would trigger ‘illicit trading’ practices.

And Saigon Jewelry Holding Company  general director Nguyen Thanh Long said the proposed policies would have tremendous impacts on the company’s business.

In the past 22 years the firm had launched 20 million gold taels or around 700 tonnes of gold into the market. And producing gold plates had been its core business sine 1989.

Long  said the new measures regarding bullion market governance should be based on market rules rather than being of an administrative nature because the price of gold in the domestic market largely depended on the world market.

“If gold plate trading was banned, people would turn to hoarding gold in other forms, unless they did not want to keep gold any more,” Long said.