Gold shops to restart imports once profitability is assured

The State Bank of Vietnam (SBV) has given a green light for companies to import gold. Some gold trading companies, meanwhile, are revving their engines in anticipation of importing gold for profit.

The closing gold price on July 10 was at $1212 per ounce on the world market. As the price unexpected rose by nearly $20 per ounce, the domestic gold price on July 11 also soared to 28,27-28.33 million dong per tael.

Some goldsmith shop owners noted that big collectors are also trying to gather dollars, forcing the dong/dollar exchange rate to increase by nearly 20 dong.

According to the gold traders, with a dong/dollar exchange rate of 19,185 dong per dollar, plus import tariffs and related expenses worth 300,000 dong per tael, the world price stands at 28.2 million dong per tael. With no big gap existing between world and domestic prices, now is not the right time to import gold.

Still, some companies are eager to import gold. The Saigon Jewellery Company (SJC), for example, plans to import five tons, while Phu Nhuan Jewellery Company is ready to bring in two tons. The opportunity to import gold will come when the world price is lower by 150,000 dong per tael than the domestic price.

Company analysts have observed that they must still wait for licenses and government agencies will set the time for importing gold. As a result, it is very difficult for firms to choose the right moment to fix prices with foreign partners.

Additionally, since Vietnam does not import gold regularly, foreign partners have not prepared gold for delivery. Hanoi and HCM City gold-bonded warehouses have not been brought into full play and thus companies need at least two days to obtain gold, which will make gold slow to intervene in the market.

Those analysts who applaud the decision to allow gold imports argue that it will prevent illegal imports and help halt dollar price escalation in the world market. Others have warned that gold imports will lead to higher demand for dollars.

In fact, most importers are enterprises that have the advantage in trading gold. The gold supply from the public is dropping since many sold their gold months ago. If enterprises import gold, they can still export gold under the mode of jewelry products when the world price rises higher than the domestic price to earn foreign currency.

As a result, the gold imports will not affect dollar supply and demand.

Huynh Trung Khanh, Advisor to the World Gold Council in Vietnam

In early 2010, Vietnam imported 7-8 tons of gold, but it exported 36 tons by the end of June 2010. This demonstrates gold import profitability and that gold exports could bring income in excess of one billion dollars, a big sum of money.

It is a reasonable decision by SBV to allow gold imports, but it would be even moreso if gold imports are equal to 50 percent of gold exports. The watchdog agency should extend gold import licenses’ validity from two weeks-one month to six months to allow more flexibility in setting prices with foreign partners.

Nguoi lao dong

Tags: vietnam gold, Vietnam gold imports, Vietnam gold market