Vietnam suffering losses in “gold game”

The State Bank of Vietnam’s decision of allowing import of 5 tons of gold and another 5 tons in 2 more days has been making domestic gold ease.

But, some problems in the regime of managing the gold market has led to export of low-priced gold and import of costly gold, causing big losses for the economy.

July data showed that Vietnam exported 30 tons of gold for $1.2 billion, averaging $40 million per ton. Meanwhile, many nations and international finance organizations en mass purchased gold. Mexico, South Korea, Thailand….each bought tens to hundreds of tons of gold. In July alone, SPDR Gold Trust purchased around 80 tons of gold and sold out few. Even enterprises in Japan, South Africa, Turkey…also raced to buy gold from Vietnam.

In August when the global gold increased sharply, these buyers who previously bought huge volume of gold earned big profits. In Vietnam, traders took advantages to push up domestic gold prices that were 1-2 million dong per tael higher than world’s level. Then, institutions and individuals, who had offloaded, had to buy back gold at high prices. There was a gold purchase wave in the whole market. At 3pm on August 10, the domestic gold went down to 44.4 million dong/tael, causing heavy loss for those who had purchased at 45-46 million dong.

But, the biggest damage is seen in the economy. It is assumped that an enterprise imported gold at $1,750 per ounce, 5 tons of gold will cost more than $300 million, averaging $60 million/ton. Meanwhile, few months back, Vietnam had exported gold at $40 million per ton only. So, the whole society will have to offset $20 million/ton or total $100 million for all 5 tons of gold or $200 million for 10 tons.

The fact is that the problems in managing gold exports and imports resulted in gold fever and unexpected losses. From 2008 till now, the SBV annually only allows few phases of gold import with a limited volume while the gap between global and domestic gold was some millions dong per tael along with the incentive export tariff of 0%.

The imbalance between gold supply and demand created “good condition” for speculators. In the past few days, the domestic gold fluctuated around 1-2 million dong per tael whereas the purchase power at that time was very low. – Vietbiz24

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