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Attempted gold management policies are puzzling   2011-03-28 - TBKTSG

Conflicting information on attempted gold management policies is confusing people and preventing them from making investment decisions at the moment.


The domestic gold market has been heating up since February 24, immediately after the government released Resolution No 11 stipulating measures to curb inflation and stabilize the macro economy, and new measures to be applied to the gold market.


In the resolution, the government told the State Bank of Vietnam to join forces with local authorities to strictly control gold trading activities and to submit to the government a draft decree on gold market management in the second quarter of the year. The draft decree will include provisions on eliminating the bullion gold trade on the free market and prevent across-border gold trading.


The attempt to “eliminate the bullion gold trade on the free market” immediately caught the attention of the public. The information caused big worries among the public who understood that the bullion gold market would be narrowed and eliminated, and people would only be able to make transactions with big gold companies. At that time, the people, who had bar gold, tried to sell their gold, while those, who had idle money, did not dare to purchase bar gold, because they feared the gold would be unsellable.


After that, a representative from the State Bank of Vietnam came forward and explained at a conference that the government does not intend to prohibit bullion gold trading. Only gold trading companies would be able to purchase gold and sell to the State Bank, and they would not be allowed to produce gold for or sell gold to individual people.


Hearing the information, people still could not make decision on whether to buy bullion gold. As a result, the volume of bar gold sold by gold shops and companies decreased dramatically. Some shops reported a sharp fall of 50 percent in sales.


Finally, people in big cities have been rushing to purchase blank gold rings, because they believe that rings would be considered jewelry products which will be sellable even if the State Bank prohibits bullion gold trade. That explained why the volume of gold rings sold increased in proportion to the decrease in bullion gold sales.


Meanwhile, goldsmith companies do not know whether to laugh or cry. They once spent huge sums of money to build workshops and import technologies to make bullion gold. The expensive workshops and technologies may be left idle as the State Bank prohibits gold companies to trade bullion gold. Many enterprises said they would shift to make jewelry gold products, while some others said they may consider trading real estate or fashion products to earn a living.


However, suddenly, a well known newspaper on Friday quoted Tran Hoang Ngan, a Member of the National Advisory Council for Monetary Policies, as saying that Deputy Prime Minister Nguyen Sinh Hung concluded at a meeting with the council’s members that people will have the right to own bullion gold, and to trade gold with some units to be authorized by the State Bank.


Hearing the information, many people sighed with relief. However, just one day later, an online newspaper quoted an official from the State Bank as saying that the government will recognize the bullion gold ownership of individuals and institutions, but bar gold will not be allowed to be circulated on the free market. Bullion gold owners will only be allowed to sell gold to some units to be authorized by the State Bank, while they will not have the right to purchase bar gold.


As such, people have been rushing to buy blank gold rings again, because they do not know which measures will be promulgated.


To date, the real decree on the gold market management has not been released, while the information has come to the public through newspapers in dribs and drabs. For the time being, well known gold companies such as SJC, Bao Tin Minh Chau, Phu Nhuan and SBJ say they have to prepare many plans for themselves so as to get ready to any decision by the government.

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