Gold market to be knocked into shape

The State Bank just uncovered a new draft decree on bullion trading management which now awaits the government’s approval. Under the draft decree, gold production and trading will become a conditional business subject to State Bank licencing and sector’s gold input material procurement, production and distribution will be tightened.

Only businesses with a minimum registered capital of VND500 billion ($24.3 million) and holding at least 25 per cent market share in the last three years will be licenced to make gold bars.

The volume of gold bars to be produced will follow quotas granted by central bank and producers must strictly observe regulations on gold material origin to minimise usage of illegally imported gold.

Besides, to discourage speculative and manipulative gold trading, the draft decree sets higher requirements for gold trading.

Gold trading firms are required to have a minimum registered capital of VND100 billion ($4.8 million), two years of experience in trading gold, and a dealer and shop network in at least three provinces and cities. Moreover, only those that have tax payments of at least VND500 million ($24,000) a year during the last two years are eligible for licencing.

The central bank hopes stricter requirements would help ease speculative and manipulative activities in local bullion market through paring down gold manufacturers and traders in number against current extensive system of 12,000 gold traders and eight manufacturers across the country.

Bao Tin Minh Chau Jewellery Company Limited’s director Vu Minh Chau said at most two firms would stay on par with the new draft decree requirements to make gold, while just a handful of firms would be eligible for trading the precious metal.

“Tightening gold manufacture and trading is a proper step. However, too stringent requirements will trigger monopoly since only a few firms could satisfy the demand,” Chau said.

ACB Gold Centre director Tran Trong Quoc Khanh said the moves were inevitable.

“Under Resolution 11 to curb inflation and ensure macroeconomic stability, the gold bar market must be put under control,” said Khanh.

Parallel to gold bar production and trading restrictions, the central bank intends to impose high tax rates on gold manufacture and trading also.

Accordingly, the Ministry of Finance shall join hands with central bank and competent state agencies to enact policies on diverse tax lines applicable to gold imports in each developmental period.

Vietnam Association of Financial Investors (VAFI) general secretary Nguyen Hoang Hai suggested imposing 10 per cent value added tax on the purchase of gold bars and gold jewels as seen in many countries.

The central bank assumed taxing gold trading would help tackle ‘goldisation’ of the economy.

Besides gold bars, gold jewels will also be subject to tighter control and gold jewel firms shall be required to obtain licences. Besides, to restrict gold purity rate frauds, businesses shall be required their gold products to carry exact purity rates.