The State Bank of Viet Nam said it would allow gold bullion already on the market to be traded even when a stricter regulation comes into effect at the beginning of next year.
The central bank was responding to traders' concerns that some types of gold bullion would not be allowed to be traded when the new rule came into force.

Under the gold management decree, which has been in the drafting stage for almost a year, new traders in gold bullion, jewellery and ornaments will need to apply for a licence from the State Bank.

Existing producers and traders in gold jewellery and ornaments must re-register with the business licence authority and then get a quality certificate from the central bank within 12 months of the decree coming into effect.

Gold bullion traders must go through the same process but within six months of the decree coming into effect.

Only enterprises owning at least VND500 billion (US$23.58 million) in charter capital and which have had at least a 25 per cent share of the domestic gold bullion market for the previous three years will be permitted to produce gold bullion. The State Bank will decide each firm's production quota.

A company will only be allowed to trade gold bullion if it has a charter capital of at least VND100 billion ($4.7 million) and been in business for at least two years. It must also have paid annual tax of at least VND500 million ($23,590) for two consecutive years and have offices in three major provinces or cities.

Credit institutions are also able to trade gold if they have at least VND3 trillion ($141.51 million) in charter capital and have offices in five major provinces or cities.

The State Bank will decide quotas for the import and export of gold bullion, which will attract a zero tax rate.

If approved, the new decree will replace Decree No174/1999/ND-CP, issued in 1999.

After the State Bank's announcement, more people sought gold as a safe haven for their money, creating a strong demand. The prompted Sai Gon Jewellery Co (SJC), which has a 90 per cent market share, on Wednesday to cap the maximum volume of gold sold to each customer in order to curb gold speculation.

Nguyen Cong Tuong, SJC's deputy head of business department, reported the total amount traded reached 7,000 taels (one tael is equal to 1.2oz).

Meanwhile, sales of other gold bar brands were hovering around 700-1,000 taels.

"While we are waiting for the final decision of the Government, I think we should just rely on well-known gold brands," said Do Thi Hai, a gold customer in Ha Noi. "I only buy SJC gold bars."

And many other retailers also shared Hai's opinion although SJC prices were VND100,000-200,000 more than other brand prices.

Some industry experts said that among the six gold bar producers, only SJC was likely to meet the new requirements in the central bank's proposal.

"If the current public preference for SJC brand spreads, other gold bar producers will be in big trouble with their bars already on the market," said Dinh Nho Bang, deputy chairman of the Viet Nam Gold Trader s Association.

Bang said in case other gold bullion producers failed to meet the new requirements, the State should purchase all their existing bars, based on market prices, or allow the companies to export those products or ask the State Bank to purchase gold bars of other brands and reprocess them under the SJC brand.

"If these actions are taken, the interest of the economy and that of each individual will be guaranteed," Bang said.

There are about 10,000 gold retail outlets dealing in bullion. The major firms are Sai Gon Jewellery Co, Phu Nhuan Jewellery Co, Bao Tin Minh Chau, Agribank Gold and Jewellery Co, Sacombank Jewellery Co and Asia Commercial Bank.

Le Xuan Nghia, deputy head of the National Financial Supervisory Committee, said as of last June Viet Nam's total gold holdings were worth 20-45 per cent of the country's GDP. Most of the holdings were held by private individuals. Central bank reserves were insignificant, he said.

Domestic gold prices yesterday were quoted around VND44.50-44.57 million (US$2,094-2,103) per tael, the US dollar cost VND21,005-21,011 at banks and VND21,280-21,330 on the black market.

Gold on the global market steadied yesterday but declines in equities, blamed on the euro zone crisis, could prompt investors to sell bullion to cover losses, while a firmer US dollar also put pressure on prices, which have slipped more than 10 per cent since the record peak.

VNS