Vietnam's State Bank to consider controversial gold trading floor

• Disputed proposal seeks to strike gold on 'risky' trading floor
• Prime Minister wants GDP at 6.7 percent this year
• Vietnam targets GDP growth of 7 percent over next 5 years

The State Bank of Vietnam will introduce solutions to effectively manage the gold market, Chief of the Government Office Mai Tien Dung said on Thursday at a press conference.

“The State Bank will take into consideration all opinions either for or against the establishment of a gold trading floor before putting forward any management measures,” said Dung.

Vietnamese people cling on to an old habit of hoarding gold to ensure their financial security.

However, Minister Dung said people have been shifting from relying in gold to investing in stocks.

“We have step by step managed to prevent ‘goldenization’ in the economy. Currently, gold bullion trading is there to basically meet public demand,” Dung added.

Customers look at gold necklaces at a jewelry store. Photo by Reuters

In 2010, Vietnam shut down 20 gold trading floors that were spinning out of control. The government said it was concerned that investors had been drawn into overleveraging their positions by low interest rates and the fast-increasing price of gold.

In 2012, the central bank “administratively acquired” Saigon Jewelry, one of very few gold bullion refiners that is allowed to import gold by the central bank.

Minister Dung said the gold market has now stabilized following falling demand.

Fluctuating gold prices no longer control the foreign exchange market and the exchange rate between the Vietnamese dong and the U.S. dollar, which has stabilized the macro-economy, he added.

“The aim is to maintain a stable gold market and prevent ‘goldenization’ in the economy. The next step is to mobilize funds that have been invested in gold for socio-economic development,” said Dung.

Last month, Nguyen Thanh Long, chairman of the Vietnam Gold Trading Association, suggested setting up a national gold trading floor to mobilize this capital flow from members of the public for the country’s development.

However, not everyone agrees with him.

Nguyen Duc Do, deputy head of the Institute of Economics and Finance, argued that stock exchanges rather than gold trading floors already function as an effective channel of raising funds for economic growth and social development.

Most Vietnamese people don’t see gold as an investment to make a short term profit. They use gold to hedge property transactions, Do said. 

They hoard gold as a buffer against political, social and economic uncertainty, so they would not have much interest in trading their gold on the floor, he added.