VietNamNet Bridge – Gold management took center stage at a meeting between experts and National Assembly deputies in HCMC on Tuesday, with controversies arousing how to stabilize the market and to make the most of this huge asset at home.

High-profile experts and NA deputies debated various issues, from mobilizing gold from the people and amending Decree 24/2012/ND-CP on gold market management to selling gold from the national reserves.

This is the third time economic experts have gathered in HCMC to discuss solutions to the gold market. However, opinions still differed at the end of the meeting.

The controversial gold price gap

Tran Du Lich, deputy head of the NA deputy delegation for HCMC, said many voters are of the opinion that the people suffered damages due to the price gap as they had to buy gold at a price millions of Vietnam dong higher than the global one.

Currently, banks are buying gold to consolidate their short positions, thus creating a new demand besides the normal demand of the people. Meanwhile, the people do not sell gold, resulting in the widening price differential, expert Le Dat Chi explained.

“In addition, making SJC the national gold brand has rattled the people, leading to a high demand for SJC gold. The State Bank of Vietnam has deeply involved itself in gold auctions, but it asks for high selling prices to minimize risks due to the unpredictable fluctuation of the global gold price. This has made the domestic price increasingly higher than the global one,” Chi said.

Some experts deemed the wide price gap not a big problem, however.

“Spending dozens of billions of U.S. dollars to reduce the price differential is unnecessary,” expert Huynh Buu Son said. According to Son, major gold buyers are not workers, but investors and speculators who are normally rich.

If gold is imported to narrow the price gap, it is investors who benefit. Spending a huge amount of money on importing gold brings about nothing, while it is the economy that must be the top priority, Son said.

NA Deputy Lich noted that Son’s view is similar to the central bank’s, but observed that before Decree 24 on gold management was issued, the price gap was not that wide. He hinted at the poor management role of the central bank.

“When monopoly took toll, the price gap widened,” Lich said, adding it is important to contain the price gap.

Nguyen Thanh Long, chairman of the Vietnam Gold Business Association, said that auctioning gold was just a short-term solution to help commercial banks.

According to Long, the gap would have been wider if gold had not been sold to banks lately.

Meanwhile, Pham Do Chi proposed to remove Decree 24, eliminate monopoly in gold processing and open the national gold floor to regulate the market.

How to mobilize gold

Most of the experts agreed that the State Bank should mobilize gold from the people via banks and then deposit it in foreign countries to earn interests as it was wasteful when a large gold amount was left untouched at home.

Responding to this, Nguyen Hoang Minh, deputy director of the State Bank’s HCMC Branch, said that if 500 tons of gold as estimated to be held by the people was mobilized, the country would have to pay around VND300 billion in interests each year.

According to Minh, depositing gold overseas will require the conversion of gold into international brands, and as the interest rate is lower compared to the domestic rates, losses will be certain. In addition, there is a liquidity risk when mobilizing gold, Minh said.  

Participants at the meeting were also at odds over whether to sell gold of the foreign exchange reserve or not, with most of participants saying that stabilizing the market by selling gold will put the reserve at risk. However, Son said that this solution would not affect the reserve as gold like foreign exchange could be easily converted.

Source: SGT