Overview on gold foreign trade in 2009-2010

As posted by the Financial Times, during the last two years, Vietnamese traders tended to export highly-golden jewelry to Switzerland as a trick to avoid the domestic authorities’ regulation on limiting and prohibiting export of bar gold.

After export, the amount of golden jewelry will be melted and casted into bar gold as normal. Switzerland gains the high faith of Vietnamese enterprises in a long time because the North European country is very famous with the gold melting industry that processes all of golden products such as ring or needle support into international-standardized gold bars.

Statistics of 2008 and previous years showed that Vietnam only exported a small volume of 3.2 tons of golden jewelry to Switzerland, bringing in 71 million Swiss franc ($77.5 million).

However, the situation suddenly changed in the last 2 years as Vietnam became the largest and only gold exporter to Switzerland. Most of golden jewelry coming from Vietnam had the same destination that was the melting factories of big processors such as Argor-Heraeus, Metalor, MKS Finance and Valcambi.

Cameron Alexander, Analyst of GFMS precious metal consulting firm explained: “In Vietnam, enterprises are now limited in exporting high-content gold bars. So they turned gold bars into golden jewelry and then export. This is a hole in Vietnam’s management policy and many people have abused it to earn huge amount of foreign currencies”.

Last year Vietnam shipped nearly 61 tons of precious metal to Switzerland, earning 2.6 billion Swiss franc ($2.8 billion), according to the importer’s Federal Customs Department. The agency also reported the country spent 1.9 billion franc importing 54 tons of gold from Vietnam in 2009.

All data excluded gold bar seen as “monetary gold”. The gold amount exported from Vietnam to Switzerland especially increased sharply in some rare times when Vietnam’s gold prices were lower than world’s levels.

Hasan Demir, a representative of Swiss Federal Customs Department said that non-stop increases in gold price during recent years along with the depreciation of Vietnamese dong pushed gold owners in Vietnam to sell.

A firm in Vietnam Gold Trading Association told VnExpress that traders find out the way to export gold every time when local prices were lower than global levels. During the period of 2009 to 2010, only some companies licensed to take a limited quota could export gold bars. Meanwhile, export of golden jewelry is easier and not be taxed. Therefore, a lot of companies processed gold bars into jewelry with high gold content and then export. Selling price for Swiss partners is the same of gold bar.

Only costing a little for processing, traders can earn a big profit in foreign currencies from difference in domestic and foreign gold prices. Strict regulations forced traders to do that. In 2009-2010, a firm exported 7-8 tons of golden jewelry and Switzerland’s statistics were relatively close to the reality.

Gold market regulator has kept a close track of the situation that companies turned gold bar into high-quality golden jewelry for export. Thus, from January 1, 2011, relevant agencies and Ministry of Finance agreed to apply a tariff of 10% on physical gold, gold bar, gold powder and jewelry with high gold content instead of previous level of 0%.

Data of Vietnam’s General Statistic Office (GSO) indicated that last year the country’s import of precious metal and germs and products cost more than $1.1 billion, up 124.7% year on year. Meanwhile, the export of these products brought in $2.82 billion, rising by 3.4% against the year earlier. In 2009, the export reached $2.73 billion while the import spending of the products was only $492.1 million.

Along with gold smuggling, Financial Times said Vietnam had to face illegal import of gold. Analyst Cameron Alexander said, GFMS firm saw that a large volume of gold flew to Vietnam in some recent years from Thailand, Laos and Cambodia along with China.

Vietnam’s data showed that net export of gold bar gained $2-3 billion during the past 2 years, mainly to Switzerland whereas World Gold Council recorded a net import of $2-3 billion. The difference came from the offloading of capital source as Vietnamese people raced to sell Vietnamese dong to buy illegally-imported gold that was not displayed on official statistics, according to economists. – Vietbiz24

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