Domestic gold price increased 650,000 dong per tael in October

The domestic gold price increased 650,000 dong per tael in October, or 1.5%. Also in month, the State Bank of Vietnam (SBV) allowed to sell gold to stabilize the local market.
Ending October, the SJC gold price closed at 44.55-44.85 million dong per tael, up 650,000 dong per tael from the closing session of September.

Thus, in October, the local gold price increased 1.5% after losing 2.6 million dong/tael in September, or 5.4% month on month.

In this month, the SJC gold price sometimes tumbled to 42.9 million dong/tael (October 20), the lowest since September 20, but even climbed to 45.6 million dong/tael (Oct 28), the highest since September 24.

The local gold price fluctuated in accordance with the evolution of the global counterpart. At 5:00 pm on October 31 local time, the gold price for December delivery on Comex floor, New York, was at $1,718 per ounce, up over $90 or 5.7% in October.

Highlights on domestic gold market in October:

On October 5, after the local gold price was higher than the international counterpart by four million dong/tael, the State Bank of Vietnam (SBV) confirmed to have enough strong measures to stabilize the local market in accordance with the world gold price tendency to prevent gold speculation and smuggling across the border.

On October 6, the central bank issued Circular No 32 amending some regulations for termination of capital mobilization and lending in gold at credit institutions.

Under this circular, some commercial banks were allowed to convert 40% of their gold fund into cash to support the local gold supply with an aim to narrow the difference between local and international gold prices.

At the same time, these commercial banks were also allowed to open gold accounts in foreign countries to balance their gold status.

In the first week of gold sale under the stabilization program, the local newswire VnExpress cited data from banks and enterprises as saying that five banks together with Saigon Jewelry Co (SJC) called group 5+1 sold out 10 tons of gold according to the listed price of SJC. On October 19, the local newspaper Thanh Nien said the central bank allowed the group 5+1 to sell additional five tons of gold under the stabilization program phase 2.

On October 8, in an effort to prevent gold hoarding phenomenon in the market, the central bank issued Circular No 33 to stop lending capital for gold purchase except getting the central bank’s license for gold material import.

As reported by Thoi Bao Kinh Te Saigon newspaper, the difference between local and global gold prices still remained high due to mistakes from gold sales of the central bank’s gold price stabilization program. Accordingly, the central bank’s Circular No 32 clarified banks that are allowed to sell gold in the price stabilization program will be responsible for their profit or loss in business. For banks and SJC, they are businesses; therefore as for them profits will be placed on top, so they must care about their profit at first. The central bank should have fixed the selling price, time and volume to achieve its goal.

On October 28, to overcome the shortcomings of the market, the central bank submitted the government a draft decree on gold trading management with seven main points. As per which, the central bank will closely manage the gold bullion production activities by limiting the number of gold bar producers. The gold bar makers must have minimum chartered capital of 500 billion dong with full location, facilities and equipments. In addition, they have to account for at least 25% of the market share of gold bar production in latest three consecutive years.

In addition, to be allowed to trade gold, the gold dealers will have to have chartered capital of from 100 billion dong and higher together with two years experience in gold trading activities, make from 500 million dong and higher for business tax payment in the latest two consecutive years and a network in three provinces and cities and higher.

At present, Vietnam has over 12,000 gold traders mainly in big cities such as Hanoi and HCM City. The total number of enterprises now is eight companies, of which gold bar product of Saigon Jewelry Co (SJC) accounts for 90% of the country’s market share. – Source:Vietbiz24

Posted by VBN on Nov 2 2011. Filed under Gold. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry