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Five banks to trade gold bars to ‘stabilise market'   2011-10-07 - VNS

Asia Commercial Bank, Techcombank, Eximbank, Sacombank and DongA Bank have been authorised alongside Sai Gon Jewelry Co (SJC) to trade in gold bars at quoted global prices in an effort to stabilise the chaotic domestic market for gold.

The five banks will be able to buy gold from and sell it to individual customers at prices announced by SJC, under a decision announced yesterday by the State Bank of Viet Nam.

The measure would help close the gap between domestic and global gold prices and halt speculation and price manipulation, DongA Bank deputy director Nguyen Kim Xuyen told the online newspaper VnExpress.

The gap would more closely adhere to actual changes in supply and demand, suggested Tran Trong Quoc Khanh, director of Asia Commercial Bank's gold trading centre.

The State Bank move had an immediate impact on the domestic gold market yesterday, sending the domestic price down significantly despite increases in the world price.

At 5pm yesterday, SJC posted buy/sell prices of VND43.65 million (nearly US$3,000) and VND44.07 million ($2,120) per tael, with one tael equivalent to 1.2 ounces. At the same time, the spot price on the London Bullion Market was $1,652 per ounce.

The domestic price had therefore moved to within about VND1.4 million per tael of the prevailing global price. In late August, SJC and several companies were requested to sell gold in order to ease domestic price pressures, but the result was modest and prices remained high, with the domestic gold price last week exceeding the global price by nearly VND5 million per tael.

Meanwhile, a large volume of gold, estimated at around 100 tonnes, remained idle, on deposit in banks. If the central bank allowed commercial banks to sell off these gold deposits, the domestic gold supply would soar and help the nation save foreign currency expended on gold imports.

The central bank should issue gold certificates that could be sold to individuals at prices below market price, discouraging citizens from buying and selling gold on the market, suggested Viet Nam Gold Business Co general director Tran Thanh Hai.

A national gold trading floor should also be established, operating according to international standards and allowing the State to intervene directly in the domestic gold market through its power to manage the exchange, said economist Le Dang Doanh, who criticised gold import quotas.

He said that the central bank should play a role as the unique agency exporting and importing gold while commercial banks could be granted more rights to trade gold as a type of foreign currency.

The central bank is currently considering a draft decree that would enhance its powers to manage the gold market. Under the draft, the State Bank would retain the power to grant licences to produce gold bars, as well as to permit designated businesses and commercial banks to trade in gold bullion, curtailing the number of individuals and organisations trading gold bars.

Dollar market

Meanwhile, the central bank on Wednesday said it would continue selling US dollars to cool down the domestic foreign exchange market, ensuring that the value of the domestic currency does not fall by more than 1 per cent against the US dollar between now and the end of the year.

The interbank exchange rate yesterday reached VND20,648 per US dollar, VND20 higher than stable rates over the past 35 days. The dollar settled on the black market yesterday to VND 21,450-21,550 after hitting a record high of VND21,550-21,600 on Wednesday.

Vietcombank has increased its buy/sell rates to VND20,850/VND 20,854 per dollar, while the rates at Vietinbank and Eximbank yesterday were VND20,840 /VND20,854 per dollar.

A general director of a big gold company, who declined to be named, said this year the greenback used for importing gold reached $1.5 billion. In September alone, the figure was $600 million.

Some gold importers did not have enough dollars to import gold so they had to buy the greenback at a price higher than the quoted rates at banks, he said.

In addition to be affected by gold imports, the forex rate hike was also due to rumours that the central bank would soon make adjustments on the forex rate, which it eventually did.

An executive at Viet Nam Export-Import Commercial Joint-Stock Bank (Eximbank) said that the inter-bank rate increase was just the way the central bank managed the exchange rate flexibly to create stability for the market.

The slight adjustment was not the result of rising dollar demand.

Vo Tri Thanh, vice director of the Central Institute for Economic Management, however, said there would be a higher exchange rate pressure for the rest of the year.

There were four main reasons affecting forex rates, including rising inflation, given strong shopping demand, a high trade deficit, dollar-denominated loans that have fallen due, and the uncontrollable gold market, Thanh said.

The leader of one commercial bank said the greenback would drop again when the central bank applied ceiling rates for gold mobilisation and allowed some banks to sell gold.

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