Disputed proposal seeks to strike gold on 'risky' trading floor

By    May 19, 2016 | 03:20 am PT
A national gold trading floor could help mobilize gold from members of the public to serve the country’s socio-economic development, said the Vietnam Gold Trading Association (VGTA). However, not everyone agrees with the proposal.

Nguyen Thanh Long, chairman of the association, said the estimated volume of gold held by the public may be up to 500 tons.

He suggested setting up a national gold trading floor to prevent speculation and to mobilize this capital flow from the public for the country's socio-economic development.

He also said an official gold trading floor would curb gold smuggling and state budget revenues would increase from collecting more taxes.

However, some experts argued that the proposal is unfeasible.

Vietnamese people have an old habit of hoarding gold to ensure their financial security, said Nguyen Duc Do, deputy head of the Institute of Economics and Finance in an interview with the Vietnam News Agency.

Most people don’t see gold as an investment to make a short term profit, so they would not have much interest in trading their gold on the floor, he added.

Do is skeptical that mobilizing gold from the public would help economic growth or social development. He argued that stock exchanges rather than gold trading floors already perform that role by allowing companies to easily raise funds from private and institutional investors.

Moreover, gold trading floors will run counter to the government’s policy of curbing gold hoarding and speculation, and minimizing the influence of the gold market on monetary policy. When gold prices vary greatly between the domestic and global markets, it becomes extremely difficult for the central bank to regulate the exchange rate and implement monetary policies.

“Gold prices increased tenfold between 2000 and 2011, offering annual interest of 20 percent. How can a business generate such a high profit margin? Gold lending is likely to pose high risks, so the government should not allow this to happen,” said Do.

In fact, banks raised gold deposits and offered gold loans in the past, but over the years, especially in 2010 and 2011 due to the significant fluctuations in gold prices, this business has failed to bear fruit.

This is not the first time that Vietnamese authorities have called on the public to free up funds from gold.

In 2012, former central bank governor Cao Sy Kiem said the central bank should issue gold certificates as a way of mobilizing gold from the public.

Also in the same year, the central bank "administratively acquired" the Saigon Jewelry Co., reportedly one of very few gold bullion refiners that is allocated an import quota by the central bank.

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