Seeking the right pathway for physical gold trade

Economic expert Ngo Tri Long said the State Bank of Vietnam (SBV) constantly importing gold and pumping it into the market to recoup money would lead to a big asset amount remain idle not injecting into production.

Besides, SBV importing gold would encourage people to hoard gold, which goes against the government’s de-goldisation policy.

Gold trading firms assumed banks rushing into mobilising and lending in gold in the past had led to bullion market uncertainties. The market has resumed stability so that the SBV should contemplate ways to contain physical gold trading.

Vietnam Gold Trade Association general secretary Dinh Nho Bang suggested forming national gold exchange to drive down physical gold transactions, arguing that liberating the gold market and establishing the gold exchange was a common practice worldwide.

Advocating this idea, gold trading firms said the gold exchange risky trade in the past stemmed from the fact that by that time state management bodies did not have in place a legal system and sanction measures strong enough to ensure the model’s safe operation.

Senior banking expert Nguyen Tri Hieu assumed a national gold exchange coming into existence would help bridge the gap in domestic and world market gold price, enhance gold transaction transparency while the state could more easily control the market.

The SBV, however, would not consider establishing national gold exchange or green-lighting accounts-based gold trade at least in the short-term, according to an SBV source.

“Accounts-based gold trade is a sort of gambling in which bankers always gain while gamblers often turn out empty-handed,” the source said.

Dr. Le Xuan Nghia, a National Financial and Monetary Policy Advisory Council member said: “The SBV importing gold for sale in the domestic market is important but this should not be a long-term tactic. To close the gap in domestic and world market gold price founding national gold exchange would be a viable option.”

“People having gold would be invited to deposit their gold in the exchange. They could sell their deposited gold or take back gold certificates. They could take back gold at any time,” said Nghia.

Experts assumed with a suitable mechanism on gold certificate issuances the SBV could mobilise several hundred tonnes of gold from the community. In doing so, physical gold would feature a vibrant life whereas the SVB did not have to spend billions of US dollars into importing gold every year.  

But once the gold exchange was in operation, state competent bodies needed to present close regulations as applied to the stock market to avert speculative and price manipulation factors, and reduce financial leverage at maximum, the experts said.