The
most heated issue mainstreamed on local media these days is undisputedly the
gold price and the mechanism behind the gold fever.
For days on end, the local gold price stays
higher than the global price by some VND4 million a tael, or rather, the
precious metal is some US$180 more expensive at home than abroad for a troy
ounce. Long queues of gold buyers are seen lining up at gold shops to snap up
all available, despite their being aware that they are taking the huge risks.
For a country whose gold stock is estimated at
up to 500 tons, the prolonged fever is phenomenal in the sense that no
effective solutions are taken to douse the fire, and the central bank’s
reaction is quite muted. Just a tiny part of the gold stock, say experts, will
be more than sufficient to quench the thirst, but it looks like that the
central State Bank of Vietnam has chosen the way of inaction. In other words,
the central bank has refused to unleash the treasure that has been blocked from
flowing out for months.
The gold rush seemingly took root in the
central bank’s move to force commercial banks to adhere to the ceiling deposit
rate at 14% annually for Vietnam dong, a rate much lower than the real
inflation. Such a decision turned the tide – regrettably to the undesirable
side to some extent – when many people shift their money to the safe-haven
asset of gold. But the precious metal is not ample, as supply largely depends
on the closely-controlled quota system meant by the central bank to choke off
adverse impact on the foreign exchange rate and the country’s foreign reserves.
Sai Gon Tiep Thi says the restrictive policy
towards gold imports by the central bank causes a shortfall on the market, but
the key reason is the mechanism preventing gold from flowing freely. Citing
figures from banks that were mobilizing gold before a ban months ago, the paper
says total gold deposit amounted to nearly two million tales, and “assuming
that these banks can sell 80% of their gold deposit, such an amount will drag
down the gold price immediately.”
Thoi bao Kinh te Sai Gon in an article titled
“Look directly into gold” says the central bank has gone to extremes when
overly controlling the gold market by setting up hurdles to block the gold
flow.
“Banks are banned from mobilizing and lending
gold… On the market, gold is feverishly hot while inside banks, gold is
frozen,” says the weekly newsmagazine, which cites the central bank’s figure to
claim there are up to three million tales being shut in.
In an online discussion organized by the news
website Vnexpress this week, experts also pinpoint the central bank is to blame
for the gold fever.
Vo Tri Thanh, a well-known economist, says on
the news website that the majority of people are of the opinion that the gold
stock is ample and the crucial point now is how to mobilize gold from the
public for stabilizing the market, according to Vnexpress. Similarly, Do Minh
Phu, a gold entrepreneur, says in the discussion that if the huge resource of
gold is properly mobilized, the central bank will have a huge amount of gold to
regulate the market, rather than relying on imported gold.
Even gold available on the market that is not
formally imported via the quota regime has not been properly put into
circulation to cool down the fever due to concerns over the illegal origin of
such assets, according to Tuoi Tre.
Saigon Jewelry Company (SJC) has refused to
process gold not originating from quotas into gold bars bearing the brand of
SJC, which is recognized as the benchmark and favored by the public, although
not all such gold materials are illegal. The newspaper quoting sources say the
amount of gold reduced from outdated jewelry products and from other bullion
traders bearing brand names other than SJC may be as high as four tons, but SJC
refuses to process such gold materials into SJC products.
For bullion traders, the blocked way creates a
golden chance for them to reap profits while transferring all the risks to
buyers.
As the supply is monopolized by a few traders
and banks that are authorized by the central bank to import gold, these
enterprises have managed to manipulate prices, keeping the differential wide
between local and global prices to earn hefty profits.
The spillovers from the current policies have
been highly damaging.
For the State, it is billions of U.S. dollars
having been used to import as much as 20 tons of gold since early August, only
to partially quench the public thirst without making any positive contribution
to the economy, according to Nguoi Lao Dong. Furthermore, the gold fever also
piles pressure on the foreign exchange rate and threatens macroeconomic
stability while the country’s huge resources remain untapped.
For gold buyers, the damages are even more
apparent as they face the loss of trillions of Vietnam dong due to paying the
excessive price for gold.
For most banks, they cannot make the most of
the great treasure that are staying idle in their coffers.
All such distortions on the market – including
the quota regime – are attributed to the way to the flow of gold has been
blocked unnecessarily. “We can stabilize the market by using the huge resources
of the people… and by looking directly into gold,” says Thoi bao Kinh te Sai
Gon.
By Son Nguyen - The Saigon Times Daily
Business & Investment Opportunities
YourVietnamExpert is a division of Saigon Business Corporation Pte Ltd, Incorporated in Singapore since 1994. As Your Business Companion, we propose a range of services in Consulting, Investment and Management, focusing three main economic sectors: International PR; Healthcare & Wellness;and Tourism & Hospitality. We also propose Higher Education, as a bridge between educational structures and industries, by supporting international programs. Sign up with twitter to get news updates with @SaigonBusinessC. Thanks.
No comments:
Post a Comment