Since March 28, the State Bank of Vietnam (SBV) has auctioned 1,270,000 taels of gold, equivalent to more than 48.8 tonnes of gold, and has managed to sell 1,167,600 million taels, equivalent to 44.9 tonnes. Commercial banks have already settled their gold accounts and got rid of their role as gold collectors. Therefore, there is no reason why gold prices should remain tense during the SBV’s bidding.
Easing the gold rush
Since early July, the SBV has held three auctions of gold, but with a decline in the volume to one tonne per day instead of 1.5 tonnes. Besides, the SBV has also reduced the maximum bidding amount of each bidder in each session to 5,000 tales, instead of 10,000 to 15,000 taels as previously. The supply of gold is being continually replenished through the bidding of the SBV. Auctions of gold bar after June 30 still occur with 3 sessions per week. Accordingly, the difference between domestic and world price is shrinking to more than VND 4 to 4.5 million per tael. Gold remains hot in bidding sessions. However, experts assume that the heat of gold is not so much as about June onwards. According to analysts, speculating demand will go down, because it will be difficult to sell gold when the banks do not have to collect gold anymore, while the purchasing volume of the people on peak days just gets 10,000-15,000 taels.
Demand for gold bidding is having signs of going down when credit institution have completed gold state resettlement. Both speculators and the people buying gold are wary of hoarding gold because of huge risk of price falling down.
The gold market has been manipulated by speculators. Now, gold fever is unlikely to occur thanks to the participation of commercial banks as a tool to regulate the market in a direct manner by the SBV. With regular gold bar bidding and the commitment of being final buyer on the market, the SBV has delivered the message that it will aggressively intervene and stabilise the market.
Gold rushes also lose the support from commercial banks when the system has stopped mobilising and lending gold and backing funds for speculative activities of credit are cut off and speculative forces gets restrained. "SBV is having enough power and tools to handle when there are signs of speculation or manipulation on the market," said a senior leader of the SBV.
Those who own gold should keep it
When commercial banks finished final settlement of 100 tonnes of gold, meaning that this amount of gold will be returned to the lenders, the problem is, where and how will people keep their gold safe?
Doji Company quickly makes gold mobilising one of its new services. To deal with the regulation stipulating that commercial banks are not entitled to keeping gold, the company offers individual gold deposit service. Gold deposit interest rate offered by the company is 1.2 percent a year for the term of one month, and 1.9 percent a year for 12 months.
When the SBV prohibits commercial banks from mobilizing and keeping gold savings, many businesses operating in gold trading have taken advantage of this opportunity to offer gold mobilisation service with interest.
However, this service gets suspended after public questioning and alert.
Under the perspective of experts, when there is abundant supply of gold in the market, there is a big demand for keeping it safe. It is likely that types of gold mobilisation will be transferred into several forms such as mortgage contracts, keeping, etc.
Those activities contain a lot of hidden risks to the gold senders. Gold shops are usually limited liability companies and only responsible for their registered capital. They are not obliged and able to take responsibility to the mobilised gold. In the case when those shops, after mobilizing gold from the people, get lost and unable to pay their debts, if there is sue, only those who received mortgage from those companies are given first priority to be settled. The risk of losing everything, capital and interest, of the senders is very huge.
The above mentioned case if of businesses that do business seriously and in accordance with the law. When gold resource is abundant and lucrative, many scammers can mobilize gold with high interest and then break and disappear. Risks cannot be foreseen. Similar to current insolvent scandals, this would potentially pose social unrest because businesses do not have the function of keeping gold, the keeping is rather purely civil deal.
World gold price also poses potential risks. Despite legitimate business, many companies can also "die" due to risks when trading gold. Lesson from commercial banks is that despite all analyzing systems with risk prevention measures, they still make unavoidable losses as gold price went against prediction. Gold is still a bitter fruit to commercial banks in the past two years. Meanwhile, compared with banks, risk management capacity of enterprises is much lower. Companies would hold less responsibility with gold funds raised from people. Therefore, when the risk occurs, the loss will fall on the sender side.
For those who have gold savings, it is very difficult to choose in the moment. Keeping gold at home is completely unsafe, and they need gold keeping services. The market needs new circular guiding this kind of service. As previously, when the Law on Credit was being applied, the service of gold keeping needed no license. Under the new law, gold keeping operations must be licensed by banks to conduct services.
Gold keeping activities should be controlled tightly. If banks make charge while businesses make no charge of keeping gold for people, even with interest, issues and risks are much likely to arise. Reportedly, the government has assigned the SBV to make researches on solutions to mobilize gold capital from people for economic development. Priority is still given to stabilizing macroeconomics and value of the Vietnamese dong and reducing the attractiveness of gold.
Le Minh
Vietnamese
