Monopoly Becomes Exclusive Corporate Privileges

Notably, the prices are not driven by growing public demand as usual. Dr Tran Du Lich, Member of the National Assembly's Economic Committee, said, in the context of volatile gold market, it is not sensible to turn State monopoly into exclusive privileges of companies.

 

Domestic gold market has been highly volatile in the past time, especially close to November 25 when the State Bank of Vietnam (SBV) disallows banks to mobilise and lend gold. Perhaps, some banks might have not been able to anticipate the policy when they sold deposited gold to earn margin and now they have to buy to offset the shortage, causing that strong demand.

 

This aspect also needs to take into account. Perhaps, State monopoly can produce true quality of gold but it should not be turned into exclusive corporate privileges.

 

Strangely, gold is not priced on purity but on brand name. Non-SJC gold is only needs to be gilded to become SJC-branded gold and selling prices will rise by more than VND1 - 1.5 million per tael. Then, gold returns to its true value or this is the result of exclusive privilege?

 

Before 1975, people in the south were keen on branded gold bars. Thus, brand names also affect gold prices.

 

It is the right of the people to choose their favourite gold brand. The State should not determine the name of superiority. The most important task is to manage guaranteed gold quality of all brands. If a company sells substandard gold and cheats the public, the State must handle it.

 

The purpose of managing gold is to mobilise gold for the economy. And, there are many ways to do this.

 

If banks mobilise gold from the people, the State Bank may rediscount that gold and replace forex reserves with gold treasure. When the State Bank announced the base rate, commercial banks can base on it to impose interest rates - very low levels in comparison with Vietnamese dong. But, interest rates must be high enough to mobilise the precious metal from the people. - But, Directive No. 05 of the State Bank of Vietnam provides that gold safeguarding bears no interest for depositors.

I do not think it is rational because the people keep gold and consider it an investment channel. So, instead of mobilising foreign currencies, we may mobilise bullions. Interest rates may be low but no interest is unacceptable.

 

Gold is also a national treasure. Therefore, we need to reconsider the intention of keeping gold of the people without paying them any interest. I think we should apply a low interest rate for this.

 

That is a hint for reference. But, it is noted that we used to open gold trading floors and virtual gold trading is very risky because our gold market has not fully interlinked with the international market. Without proper management, gold exchanges will become casinos. It is also suggested that we set up a wholesale bullion market where companies import and cast gold and people buy and sell it.

 

First of all, in principle, gold management is like the way we do with foreign currencies. Secondly, we must have a good information system.

 

In many countries, the central bank grasps clear statistical information and reports on how much gold is traded, which companies supply and how reserves are. Such information must be updated. So, the central bank does not need to keep real bullions but it still knows how much gold is traded on the market. That is management.

 

We must know how many people buy and how much gold is bought to have sound management policies. We should not shock the market by granting exclusive rights to buy and sell. That is very dangerous to the market.

 

NCDT