Circular 22 hurts gold depositors

When circular 22 come into effect on October 29, local gold depositors will no longer benefit from keeping gold at local lenders, the local newswire Lao Dong reported November 1.

When circular 22 come into effect on October 29, local gold depositors will no longer benefit from keeping gold at local lenders, the local newswire Lao Dong reported November 1.

Gold depositors have enjoyed double benefits by depositing gold to the banks as they could protect their assets’ value while still earn interests. The recent local gold price rockets add one more benefits to gold depositors when these depositors withdraw gold for sale.

“As long as the public can enjoy these benefits, gold hoarding will hold on”, an analyst said.

However, the effective Circular 22 will hurt gold depositors as local lenders are expected to cut the gold deposit interest rates.

As gold depositing and lending activities are restricted, domestic gold speculators and investors will mull switching to the dong and dollar investment, boosting up production.

Investors will switch their gold investment to more profitable alternatives, analysts said; yet adding that those in habit of hoarding gold may stand still unless they have short-term demand for capital uses.

Earlier when local banks cut gold deposit interest rates to 0% after the SBV announced closures of gold trading floor and stopped gold-trading accounts overseas, the gold reserves at banks’ vault negligibly changed.

The State Bank of Vietnam’s statistics showed that gold deposits at local lenders were estimated at over 90 tons, one fifth of those hoarded by local people (about 450 tons), the newswire cited, adding that at local banks have already converted 20 tons of gold deposits to the dong which are subject to be bought by banks before July 1, 2011.

Including 40 tons of gold exported in the form of jewelry since early 2010, there will likely be 30 tons of gold deposits left in the banking system, and the gold supply-demand may be no longer the main factor to determine local gold prices in the coming time, but is expected to closely follow global ones. – Stoxplus.com

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