Central bank’s reassurance prompts people to rush to buy bullion gold

After the State Bank of Vietnam, in an effort to stabilize the gold market, reassured people that bullion gold remains a legal investment channel, people have rushed back to gold shops to purchase bar gold.

Several days ago, rumors that the government will prohibit bullion gold trade on the free market had people worried stiff. They rushed to gold shops and goldsmiths to sell their gold fearing that the assets will be difficult to get rid of one day. However, the State Bank has explained that people still have the right to hoard gold and, when necessary, sell it to agents authorized by the State Bank. The reassurance has prompted people to keep gold again as an asset.

Hoang Huu Dinh, a senior executive of Bao Tin Minh Chau Company, said people began returning to gold shops on March 16 to purchase bar gold.

“People are trying to hoard gold, considering it a safe investment which can protect them in uncertain times. The bar gold fever is occurring in many countries. Therefore, right after the State Bank announced that it does not prohibit people from hoarding gold people have been trying to buy gold when they think the prices are reasonable,” Dinh said.

“The volume of bar gold traded at Bao Tin Minh Chau was double the volume traded on previous days,” he added. “Jewellery products have been selling especially well”.

SJC Hanoi also reported a sharp increase in the volume of bar gold sold on March 16. Luu Quang Dien, Deputy General Director of SJC Hanoi said the volume of bar gold sold that day was three times higher than the sold volume of the days before, but was still lower than the buying prior to Tet.

Some days ago, gold shops purchased more than sold as people rushed to sell their gold.

“However, in fact, the volume of gold kept by people is still very large, and only a small volume of gold was sold. It is estimated that 400 tons of gold is in the public domain,” Dien said.

Though the bar gold market has warmed up, it is still less bustling than the jewellery market. Goldsmith companies have said that blank rings and bracelets made of 9999 gold have been selling like hot cakes.

However, Dinh from Bao Tin Minh Chau said the trend of purchasing jewellery products would only last for a short time. “Those who seek to buy jewellery gold are either those who want to give to relatives as presents or those who fear that it will be more difficult to trade gold in the future,” Dinh said.

“If I were a client, I would not hoard gold in jewellery products, because it is more risky to keep jewellery than bar gold,” he added.

When people purchase jewellery gold, they have to pay for the product design and processing as well. They cannot sell the design and processing back to gold shops.

Moreover, it would be much easier to hoard bar gold than to keep jewellery products, which always require careful preservation. People can easily sell bar gold to any shop, while they can only sell jewellery products to the shop from which they purchased the products. If they sell jewellery to other shops the sale prices would be very low.

The fact that people rush to sell gold and then rush to purchase gold has brought big profits to gold companies. While people feared that they would not have the right to trade bar gold in the future, gold companies did not have such a fear. Therefore, they have been quietly collecting gold, both jewellery and bullion, from the public.

A director of a big gold company in Hanoi said that gold companies do not hesitate to collect the precious metal. Companies have to store gold and they have many ways to balance the bar gold demand and supply. For example, they need bar gold to make jewellery products.

Tags: vietnam gold, Vietnam gold market, Vietnam gold prices