Gold prices cool but still remain rather hot

After reaching its peak of VND48.3 million ($2,317) per tael in early October, 2012, gold prices have gradually fallen to VND46 million ($2,206) per tael last Thursday November 1, equal to early September and reduced by VND200,000 ($9.56) per tael day-on-day.

The deadline for banks to close their gold positions has just been extended to June 30, 2013.

According to experts, gold prices have been on a decline as most of the banks have finished closing their gold positions, thus the demand for mobilising gold to repay depositors is dropping.

Gold prices have been volatile in part because of the anticipated impact of the State Bank regulations that require banks to close their gold positions from November 25, 2012, now extended to June 30, 2013.

“Banks have to buy back gold to balance their negative gold positions,” banking expert Can Van Luc said.

Do Minh Phu, chairman of Doji Gold and Gems Group, said: “Banks’ demand is for gold bars to return to customers. But the demand happened in such a short time, creating pressure on the gold market, making prices difficult to reduce.”

State Bank figures show that banks are still short of 20 tonnes gold to close their gold positions.
Reportedly, three banks have not finished closing their gold positions. The name of those banks is not announced.  

“Those banks need two months more to close their gold position,” said Le Minh Hung, Deputy Governor of the State Bank.

Thus, the State Bank in late October issued Document No.7019/NHNN-QLNH allowing banks to continue issuing short-term gold- denominated certificates until November 24, 2012 but the maturity of short-term gold-denominated certificates should not be beyond June 30, 2013, due to some banks’ difficulties in closing gold position.

Hung said the central bank would not stabilise gold prices by using foreign currencies to import gold, which could result in “goldenisation” and gold speculation.