Gold trading floors operating under “the law of jungle’

While is still remains unclear which government agencies are taking control over gold trading floors – gold trading continues to be considered a risky business that needs controlling.

Heavy criticism over loosening controls in gold trading have arisen after the recent “gold fever”, when gold prices skyrocketed to 29 million dong per tael and then dropped dramatically.

Tuan Tai gold shop, one of HCM City’s biggest private bullion traders, has suspended operations as police raided the store. Meanwhile the shop owner had fled.

It is clear that gold trading floors are places where people can make rapid profits, but they are also places where investors can lose money very rapidly.

Meanwhile, despite the high risks of the kind of business, Vietnam still has no legal framework to manage gold trading floors.

Gold trading floors in HCM City are running after they received licenses from the HCM City Planning and Investment Department. Meanwhile, other trading floors do not have license granted by government agencies.

Governor of the State Bank of Vietnam Nguyen Van Giau, under questioning on November 17, said that gold trading floors operate “in a gap” in the law because the floors have not been put under the management of any government agency.

This explains why different gold trading floors are applying different rules. On Vang The Gioi gold trading floor, investors can borrow 19 dong for every one dong they have. With Eximbank and ACB gold trading floors, investors can borrow a sum 14 times bigger than the capital they have. ACB said it can lend up to 100 billion dong. The security money required is 5-7 percent.

According to Lam Minh Chanh, general director of Vang The Gioi gold trading floor, it is much more risky to investt in gold than in stocks. Gold price are being influenced by many factors which occur outside Vietnam, including the state of the world economy, the dollar value, the purchase and sale of big funds, the gold reserves of central banks and hedge funds activity.

When asked under which laws gold trading floors are operating, gold trading floors runners said that the contracts signed between trading floors and individuals are contracts signed between legal entities and private persons, therefore, the relation is covered by the Civil Code.

Chanh from Vang The Gioi said that on joining gold trading floors, investors have to accept to follow the rules set by the floors, and any disputes will be settled by referring to the contracts.

Nevertheless, with the state of the existing gold trading floors no one can be sure of the transparency in the operation.

Investors do not know exactly the number of orders to purchase and orders to sell on the floor.

Tags: Vietnam business news, Vietnam gold price