But, domestic prices remain much higher than the international prices amid complications in the government’s bid to regulate the gold market and due to a lack of supply.
Based on the central bank’s Circular 12/2012/TT-NHNN dated April 27, 2012, banks are required to stop issuing gold certificates of deposits (CDs) from November 25, 2012.
The precious yellow metal has historically had high value in Vietnam, where people often keep it as a hedge against chronic economic uncertainty.
Under a new State Bank policy aimed to mobilise these private gold treasures as a means to support lending, Circular 12 was issued to prohibit banks from opening new gold deposit contracts. Therefore, since the beginning of last week, banks started to charge a storage fee on customers’ gold, now averaging about 1-2 per cent.
By Vietnam’s standards, current demand for gold is not high, according to a daily report on gold market by Sacombank Jewelry company on November 28, 2012. But the gold price in Vietnam is consistently higher than global market price due to Vietnam’s scarce supply—especially in SJC gold, the brand nationalised as part of the government’s effort to regulate the gold market.
At the end of last week, the cost of SJC gold was VND3.6 million ($173) per tael higher than the international gold price. The price gap on taels from rival Bao Tin Minh Chau Jewelry Company, meanwhile, was only VND33,000 ($1.6) per tael.
Vo Tri Thanh, deputy director of the Central Institute for Economic Management (CIEM), said there were now only two or three banks facing difficulties in closing their gold positions, for which the State Bank already extended the deadline from November 25 to June 30, 2012. “Gold prices should therefore come down.”
“Banks now do not pay interest on deposited gold, but even charge fee on it,” Thanh said. “It should have made people less interest in gold. However, both enterprises and people still consider gold a safe investment haven.”
The government’s exaltation of the SJC brand is seen as a source of the problem.
Nguyen Thi Cuc, Phu Nhuan Jewelry Company deputy director, said the scarcity of SJC gold supply pushed the gold price of this brand higher than other domestic gold prices. “With the same quality, other brands’ gold are sold at the price equal or lower than international one. But most customers want to buy SJC gold as they worry that in the future, only SJC gold will be allowed to circulate in the market,” Cuc said.
Moreover, according to figures from the State Bank’s Ho Chi Minh City branch, SJC has been slow to meet customer demand. It recently finished processing 160,000 gold bar taels—far short of the 350,000 gold taels (equal to 13 tonnes of gold) that the central bank has called for since September 19, 2012. Reprocessing deformed gold bars has proven slower than expected.
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