Likely bullion trading restrictions cause concern

The government’s proposed ban on bullion trading by gold shops in the next quarter has elicited warnings that it could have a destabilising effect on the economy.

Cao Sy Kiem, ex-governor of the State Bank of Vietnam, told Tuoi Tre that the resolution — announced last Thursday — should be implemented quickly to relieve the pressure on the dong, but warned the central bank should move carefully and publicise a roadmap so that the market and gold traders will be prepared.

He warned of its potential to cause a shock to the economy and give rise to a black market.

Tran Thanh Hai, general director of the Vietnam Gold Investment and Trade Corp, told Tuoi Tre that the government should also consider measures to attract the gold held by the public into the capital market.

Management of the gold market should be done using economic policies rather than administrative tools, he added

Le Phuong Thao, a resident of District 5 in HCM City, told Tuoi Tre she began to buy gold after inflation rose in recent years.

It the government does not maintain the value of the dong and ban gold trading, it will only cause people to hoard strong currencies like the euro and dollar, she warned.

This will make those currencies become even stronger and make imports more expensive, she pointed out.

A gold-shop owner told Tuoi Tre the government should be careful since Vietnamese are getting used to parking their money in gold, and a ban on bullion will force them to buy jewellery whose purity cannot be monitored.

Unlike gold bullion, there are no official agencies or regulations to regulate them and customers have no choice but trust jewelers.

A few decades ago, when there had been a similar ban, gold purity in most jewellery was just 95 percent and often as low as 85-90 percent.

A Tuoi Tre reader, Chau Pham, said there should be a gold trading floor operating like a stock exchange in which gold is traded in the form of valuable papers. It will both help the people to preserve their assets and reduce the foreign reserves’ spending on gold imports.

Charlene, a Tuoitrenews reader, disagreed with the ban saying if the government wants to control the market, it can do it in other ways since it has been a tradition to save in gold rather than money.

Since it is a safe haven in times of inflation, people will keep trading it, openly or secretly, she said.

The government may need to respect the opinion of the people and hold a referendum on this, she added.

The government last Thursday also asked the State Bank of Vietnam for proposals for regulating gold trading so that free market trade can be abolished.

This means bullion can only to be traded by shops designated by the central bank while private shops can sell gold only in the form of jewellery.

The government last year shut down gold trading floors and gold exchange operations, and also limited deposits and lending in gold by financial institutions. – Tuoitre

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