Vietnam still cannot mobilize gold from the public

If Vietnam can mobilize and use 500 tons of gold, it will have a huge volume of capital for economic development, said Huynh Trung Khanh, Member of the World Gold Council, Deputy Chairman of the Vietnam Gold Business Council in an interview given to Thoi Bao Kinh Te Saigon.

TBKTSG: Commercial banks have slashed the gold deposit interest rate to very low levels because they now do not have gold borrowers. What is your view?

Huynh Trung Khanh: Some sources claim that the volume of gold kept at commercial banks is about 600 tons, while SJC says it’s about 14.5 million tons, or even 540 tons. I believe that at least 500 tons of gold is being held. Banks can mobilize some 100 tons at the highest, about 20 percent. It is necessary to find a way to attract the 70-80 percent of the total gold volume held by people into the banking system, so that they can serve the national economy.

Currently, the gold deposit interest rate has dropped to below one percent. It is because banks do not have borrowers, (i.e., they have the ‘input’ but do not have the ‘output’). Previously, banks could sell mobilized gold to get dong and then lend it for profit. When necessary, they will purchase gold from foreign sources to pay debts to depositors. However, banks now are no longer allowed to sell gold abroad, therefore, they dare not mobilize capital anymore.

Thus, gold has been kept under the pillows of people and it is not going into the national economy or the banking system. This is a bad thing, because this means Vietnam cannot tap a huge source of capital. The volume of gold is worth nearly $20 billion, a huge sum.

TBKTSG: But how should we attract gold from the public?

Khanh: Vietnamese people normally keep gold at home as an asset. In the last few years, people deposited gold at banks, when offered high attract interest rates. However, as deposit interest rates go down dramatically, people withdrew gold and now hold it at home.

I think the key here is regulation to prohibit to trading gold on account abroad. I think that it is necessary to remove the ban, so that banks can continue mobilizing capital in gold once they can feel safe about liquidity. If the State Bank of Vietnam fears speculation, it can control the transactions by setting up guidelines such as that commercial banks must report their transactions.

Besides, the State Bank can also issue gold bonds. When the State gets gold from the public, it can sell gold for dong or dollars to put into the national economy. The Bank can also purchase gold from foreign markets to pay debts to people, of course, it should purchase gold under future contracts in order to avoid risk.

VietNamNet/TBKTSG

Tags: vietnam gold, Vietnam gold market