Gold imports to stabilise market

The State Bank of Viet Nam yesterday announced to allow companies to import five tonnes of gold bullion to stabilise the market and fight price manipulation and speculation.

The State Bank also plans to permit companies to import five additional tonnes of gold in coming days.

However, the SBV said late Monday on its website that the purchase of gold bullion at this time was ill-advised because domestic prices were greatly inflated.

Economists believe the main reason for soaring gold prices in Viet Nam is the S&P’s downgrade of US credit, together with slowing economic data. This has compounded already weak sentiment amid fears the eurozone debt crisis will spread to other nations.

Vu Minh Chau, general director of Bao Tin Minh Chau, said that in June and July a number of major companies and financial groups had purchased gold bullion in great quantity to export to foreign countries at a profit, resulting in an imbalance in supply and demand on the domestic market.

In one or two days, if gold trading companies were unable to meet market demand, major gold holders would be able to manipulate prices, Chau said.

“The current domestic price is an illusion as it is much higher than global prices,” Chau said.

The State Bank of Viet Nam yesterday reconfirmed that it would formulate policies to stabilise the value of the Vietnamese dong by ensuring investors earned a greater profit from holding dong rather than US dollar or gold bullion.

Yesterday morning, the gold price soared to VND46 million (US$2,203) per tael, up VND1.7 million against the previous session, or VND4.2 million (more than 10 per cent) against last week’s close.

One tael is equal to 1.2 ounces.

Meanwhile, the global bullion price gained more than 2 per cent yesterday morning, soaring to an all-time high for a second consecutive session. It reached $1,750 as equity markets dived on growing fears of a global recession following last week’s US credit downgrade.

Big dealers such as Sai Gon Jewellery Co (SJC), Bao Tin Minh Chau, Agribank Gold and Jewellery Co (AJC), Sacombank Jewellery Co (SBJ), Phu Nhuan Jewellery Co (PNJ) and Doji quoted buying/selling prices of VND44.7-46 million per tael in Ha Noi, HCM City, and some southern provinces.

Responding to the central bank’s gold import permission at noon, gold price immediately fell to VND44.1-45.2 million per tael in the afternoon.

Nguyen Thi Cuc, PNJ’s deputy general director, warned that individual investors should not purchase gold when the domestic price was VND200,000 or more higher than global prices.

“Flocking to buy gold will worsen the tension and people will have to buy gold at a price far higher that its real value,” Cuc said.

At 10am today there were traffic jams in Tran Nhan Tong, Ha Noi’s so-called gold street.

A Ha Noi-based economist, who asked to remain anonymous, said the central bank’s move yesterday should dampen the market. Last year, when the gold price touched record highs, the bank introduced import quotas, which had the effect of cooling the overheated market. However, a long-term sustainable strategy was needed, he added.

Viet Nam’s gold consumption increased by 2 per cent, reaching 19.2 tonnes during the first quarter of 2011; demand for gold was valued at $878 million, a 28 per cent increase compared to the same period last year, according to a World Gold Council report.

Jewellery demand increased by 7 per cent (around 5 tonnes) during the first quarter while investment demand went up by 1 per cent, reaching 14.2 tonnes.

Following soaring gold prices, the US dollar this morning cost more to buy at commercial banks. They were quoting prices in the upper reaches of the permitted crawling band, hovering around VND20,750-20,810 per dollar, up VND70-100 against yesterday.

Black market FX dealers, who were trading the dollar at VND21,000-21,300 yesterday reported a sudden demand for the greenback, but supplies had fallen. – VNS

Tags: vietnam gold, Vietnam gold imports, Vietnam gold market