Gold trading floors freezing

The trading volumes on gold trading floors have been decreasing dramatically, though gold trading floors will only officially stop operating after March 30, 2010.

On January 13 and 14, a lot of gold exchanges unanimously announced that they stopped providing loans to fund gold investments and released the plan to shut down the floors. Many gold trading floors have raised the required security money to 100 percent from the previous level of 5-7 percent only.

The moves by gold exchanges were made after the State Bank of Vietnam released a series of documents which guide the process of shutting down gold trading floors.

On January 12, the State Bank released a document, requesting gold trading floors to build up detailed plan for finalizing investors’ gold investments and shutting down the floors.

One day before, on January 11, the central bank released a document instructing gold exchanges to stop providing loans to fund investments and urging them to collect debts that the floors had disbursed.

Right after the instructions were made, the liquidity on gold exchanges has been plummeting dramatically. According to Thoi bao Kinh te Vietnam, the transactions on SBJ gold trading floor, the one with the largest network, was nearly paralised this morning, January 15. The trading volume shown on the electronic board on the floor stood still at 600 taels for several hours this morning before moving up to 640 taels at 11 am and then went up ploddingly.

Prior to December 30, the day when the Government released the decision on shutting down gold trading floors, the trading volume in the morning on SBG was 200,000 taels. The volume had gradually decreased to 50,000 taels by New Year 2010 and then dropped to 1,000 taels yesterday morning.

Thoi bao Kinh te Vietnam has quoted managers of some gold trading floors as saying that it is highly possible to see everything to be settled before the deadline March 30, 2010.

“At VGB, investors are waiting for suitable opportunities to finalise investments, while other investors have closed accounts and do not make transactions any more,” said Tran Thanh Hai, General Director of VGB Gold Trading floor.

VGB remains one of the very few trading floors which still have high liquidity now. At 12 noon January 15, the orders to trade 2,000 taels of gold were successfully matched. However, the volume was just equal to a small percentage of the trading volume it had in the golden age

Nguyen Hoang An, Director of SBJ said that with the required 100 percent security money SBJ is applying, no investor dares to begin new investment deals.

Eximbank’s gold exchange has advised investors to keep calm to choose the best moments and prices to stop loss or take profit in order to terminate contracts prior to March 25, 2010. Other gold exchanges have also given similar advices.

VIetNamNet/TBKTVN

Tags: Vietnam gold market