Gold traders seek to stabilise market

The association also suggested the government reduce the number of gold traders in the country.

"If a company wants to get a business licence to trade gold bullion it should have at least VND30 billion ($1.43 million) in charter capital. It should also have turnover of at least VND500 billion ($23.81 million) over a two-year period," the VGTA said.

There are eight gold bullion producers in Vietnam and about 10,000 gold traders. However, procedures for granting business licences are said to be without constraints.

The association has also proposed that a national gold trading floor be established, under the supervision of the State Bank of Vietnam and relevant authorities, and that its members should be commercial banks and prestigious gold enterprises.

It also said the country needed a more flexible gold export-import mechanism to bring international prices in line with domestic prices.

Gold import certificates should only be granted to those firms that are suitably qualified and that have suitable financial resources, the association said.

It also said gold should not be imported en mass over a short period because it would use up dollar reserves and affect the exchange rate.

The VGTA also proposed that the government raise the import tax on gold from 0 per cent to 0.5 per cent and lower the export duty from 10 per cent to 0.5 per cent.

Earlier this year, the Ministry of Finance turned down a proposal by the association to reduce the export duty on gold and gold jewellery. Instead, it announced that the tax rate of 10 per cent would remain in effect for the foreseeable future to limit exports and discourage gold exploitation and conserve natural resources.

The association wants the government to permit, but strictly regulate, domestic and foreign gold trading on account.

The government clamped down on gold trading on account early last year because it had brought perceived chaos to the market over the previous two years.

Dinh Nho Bang, VGTA's chairman, said: "Trading gold on account involves 70-80 per cent of all global gold trading, while trading in the actual metal is very modest."

Resolution 11, which was designed to curb inflation and stabilise the economy, called on the central bank to draft a decree regulating the gold market and banning free trade in gold bars.

The central bank has completed the draft decree and is in the process of collecting feedback from ministries, banks and gold traders this month. The bank expects the decree to be signed in the second quarter this year.

The domestic gold price increased slightly yesterday, which was not in keeping with the world market.

"Gold prices rose slightly in the morning, but fell at about 10am. The buying price was VND36.83 million per tael ($1,753) and selling price VND36.92 million," said Nguyen Huu Dang, an official from Vietnam Agribank Gold Corporation.

The opening price for Sacombank's SBJ gold rose to VND36.88 million ($1,756). The selling price also rose VND20,000 (nearly $1) to reach VND36.94 million ($1,759).

Other brands of gold also saw a slight increase in buying and selling prices of about $1 per tael.

"Growth has been slow for a week, narrowing the gap between domestic and world prices," Dang said.

A month ago, the domestic price was VND1 million a tael higher than the world price. But some experts said that if the domestic price did not follow the world trend, it would soon be lower than the world price.

Dang said the euro rose against the US dollar because the European Central Bank planned to increase the base interest rate a further 0.25 per cent. This also contributed to the hike in world gold prices.

On the Comex floor in New York, gold futures for June delivery gained $6, or 0.4 per cent, to $1,458.5 an ounce on April 6. It soared to $1,463.7 an ounce at the beginning of the session. Both the closing and peak prices of gold traded for June on April 6 were far beyond the prices of April 5.

Spot gold closed on April 6 at $1,459 per ounce, up $1.5. During the session, it reached almost $1,461.91 per ounce.

"As for the domestic price, as the State Bank of Viet Nam will prohibit trading gold bullion and restricts the supply of foreign currencies, people hesitate to keep gold," Dang said.

The interbank dollar exchange rate was announced at VND20,713 to the dollar, up VND5 compared to April 6. The Vietcombank posted selling price yesterday was VND20,920 against the dollar, while the exchange rate on the black market was VND21,100. This might have led many people to switch from buying gold to buying US dollar.