Jewelry company exec wants more gold on the market

By Minh Tri July 27, 2016 | 04:22 am PT

Would a gold trading floor convince Vietnamese people to abandon their hoarding mentalities?

The idea of setting up a national trading floor to engourage members of the public to sell their gold and contribute to the country’s socio-economic development has been met with mixed opinions.

VnExpress spoke with Cao Thi Ngoc Dung, chairwoman and chief executive of Phu Nhuan Jewelry Co., about a proposal recently made by the Vietnam Gold Trading Association to set up a national gold trading floor. The aim of the floor is to prevent speculation, curb smuggling, increase state budget revenue and, more importantly, mobilize this capital flow from members of the public for the country’s development.

It is estimated the Vietnamese public is holding up to 500 tons of gold. What do you think about the proposal to mobilize this capital flow for the country’s economic growth?

We need to mobilize this gold to serve the country’s economic growth. In order to attract this capital flow, the state needs to draw up a plan on how to effectively and efficiently use this capital and a risk management strategy to protect people’s investments from inflation, otherwise it is quite risky due to the significant fluctuations in gold prices.

I think the most critical [the government] should do is to create a favorable business environment which drives people to place (and risk) their gold rather than stashing it away.

When people put their trust in market growth, they will be willing to put their money into businesses with the hope that the return on capital will be high and pay dividends.

I think the government should set up an official trading floor which is professionally managed and regulated in accordance with international law.

After the British decided to leave the European Union, or Brexit, there was a rush to safe haven investments in gold. Some experts even forecast gold prices would hit the record of $1,400 per ounce. How will the spillover from the Brexit vote affect the domestic gold market?

Gold price fluctuations on the global world market don’t have a measurable impact on the domestic market. This is because in the past when gold prices varied between the domestic and global markets, it became extremely difficult for the central bank to regulate the exchange rate and implement monetary policies. So the central bank decided to regulate the gold market by imposing an import quota and banning commercial banks from raising gold deposits and offering loans in gold.

The recent surge in gold prices is primarily driven by psychological factors [rather than strong demand]. A gold trading floor will help link the domestic market with the international market to better balance supply and demand.

Recent volatilities are only temporary and not likely to matter in the long term. I don't think people should rush into either selling or buying gold.

What difficulties are jewelry companies facing in addition to the central bank’s gold import quota that has limited the supply to a few gold bullion refiners?

The Vietnam Gold Trading Association (VGTA) has submitted a proposal to the Prime Minister, asking the government to remove hurdles so that gold trading businesses can get easier access to bank credit.

More specifically, the association has asked the State Bank of Vietnam to ammend Circular 33 which prohibits these businesses from securing bank loans. Without official approval by the central bank governor, there is no way for jewelry companies to obtain loans from commercial banks. Since the circular came into effect, the governor hasn’t granted his approval for a single jewelry company to get bank credit to import gold.

The regulation has made it difficult for jewelry companies and gold refiners to do business due to lack of capital.

Besides, the central bank should allow companies to import gold so that we can be more proactive in meeting the domestic demand as well as exporting [gold products] to the international market.

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