VietNamNet Bridge – The information about the appearance of imitation gold bars filled with tungsten on the market has turned out to be good news because it has helped curb inflation.

Several days ago, Vietnamese people got startled at the information that imitation gold has appeared on the market.

Goldsmith shop owners received offers to sell bullion gold from some dealers from Hong Kong. However, when they cut the gold bar samples, they found that the bars only contained 60-75 percent of gold, and had some sediment like fine sand particles which they thought wolfram.

The information has immediate caused big worries among Vietnamese people, who have the habit of keeping gold as their assets in the context of high inflation, but they do not know for sure if the gold in their coffers are real gold or imitation gold. The problem is that the imitation gold cannot be discovered with modern machines.

The information has turned out to be a good solution to help curb inflation. People have become hesitant to purchase gold to store in the context of high inflation, which has helped ease the pressure on the gold market.

The information about imitation gold has immediately made the domestic bullion gold market “fall into a crisis” as said by Nguyen Minh Chau, General Director of Bao Tin Minh Chau Gold, Silver and Gemstone Company.

“The bullion gold trade turnover of goldsmith companies has decreased by 50 percent. Especially, many companies have seen the turnover drop by 60-70 percent and they are at the risk of having shut down business,” Chau said.

He went on to say that the gold business has fallen into crisis because of the people’s psychology.

As such, just a piece of news about imitation gold is enough to bring immediate effects. Meanwhile, prior to that, government agencies had to apply a lot of measures to stabilize the market. The State Bank of Vietnam had strenuously resisted with the criticism from the public when it was compiling the government decree on bullion gold trade. Governor of the State Bank many times had to explain to the public that the State does not intend to prohibit people to keep gold, and the policy to tighten bullion gold trade will be implemented in a cautious way to avoid shocks to the market.

Recently, Director of the Price Statistics Department under the General Statistics Office, Nguyen Duc Thang said on local newspapers, that people have every reason when saying that the inflation in Vietnam bears the influences from gold and dollar prices. A big volume of gold and dollars is being traded on the market, while gold and dollar could be considered as means of payment. He also said that besides the demand pull and cost push, which is considered the main reasons behind high inflation, in Vietnam, people’s psychology also serves as an important factor that causes inflation.

Therefore, when the bullion gold market suddenly falls into crisis, the pressure on inflation has been eased. And the information about the gold with impurities has turned out to be an effective method to curb the psychology inflation.

Analysts said that if the information about imitation gold had come to the public sooner, in November 2009, for example, the gold price would not have gone up and down so dramatically over the last time.

Dr Tran Dinh Thien, Director of the Vietnam Economics Institute, said that in order to successfully curb information, especially when prices bear influences from people’s psychology, the government needs to make efforts to obtain confidence from the public. It happened that local newspapers focused on reporting the price increases of goods and services at the same time, which then caused big worries among people, thus putting a hard pressure on the fight against inflation.

In order to get confidence from the public, Thien said, the government needs to be transparent in applying policies.

“When the government, for the first time, made public the information about foreign currency reserves, the exchange rate changed immediately,” he said. “After the government announced the demand stimulus packages, the businesses’ confidence index has increased”.