>> Vietnam grants new gold import licenses, quotas
The State Bank of Vietnam (SBV) has approved gold imports in reasonable volumes for just the third time in 2010.
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| The information of gold imports has eased the domestic market |
The move followed a sharp increase in gold prices on November 9. Gold prices started at VND37.5 million (USD1,875) per tael in the morning and then hit VND38.2 million (USD1,910) per tael in the afternoon.
The SBV said that the quota will be valid for two weeks and did not specify what "reasonable volumes" were.
The quota has been afforded to banks such as Asia Commercial Bank (ACB), Vietnam Export Import Commercial Joint-Stock Bank (Eximbank), Saigon Thuong Tin Commercial Joint Stock Bank (Sacombank) and VietABank and several gold businesses, including Saigon Jewelry Holding Co. (SJC) and Phu Nhuan Jewelry Company (PNJ).
SBV Governor Nguyen Van Giau said a number of banks and enterprises have received the gold import quota.
Giau said the price hike of gold is due to price changes in the world and the local market sentiment. Some marco-economic factors such as high inflation rate, trade deficit and exchange rate which have made people worried about value of the Vietnam dong, resulting in the reserve sentiment. The speculation is also attributed to the situation because people are hoarding a large amount of gold for many years.
Increases were due to gold price changes on the world market and the fact that domestic gold prices are higher than global prices. On November 9, some gold shops had to close early because of “overheating” gold transactions.
Governor Giau also added that the increase in gold prices is not due to the move that banks buy gold to close their accounts under Circular No. 22. The circular issue is necessary because up to 50% of the mobilised gold amount was poured into non-production areas, bringing no benefits to society. Changes of gold prices could lead to immeasurable risks for Vietnamese banks when the country’s insurance derivative remains undeveloped.
Giau also noted that Vietnam will have a more abundant source of foreign currency and the SBV will be willing to provide foreign currency for commercial banks to sell to gold importers and timely meet the import demand.
However, foreign currency will still be prioritised for payment demand and importing essential goods for production. The SBV will not offer foreign currency for importing luxury goods which are not named on the list of essential goods announced by the Ministry of Industry and Trade.
According to some gold businesses, the SBV’s decision to allow gold imports is only expected to help maintain gold prices, but unlikely to lower the prices. The reason is that gold agents dropped prices to sell previously imported gold.
“The gold price fever on November 9 is partially attributed to the SBV. We have asked for import quota, but got no feedback from SBV. The SBV has also sold a very small amount of USD to the market. Until gold prices soared to VND38.2 million (USD1,910) per tael, the SBV announced that they would grant the import quota with a suitable amount to stabilise the market. Therefore, we lose trust in the SBV, which has partially resulted in escalating gold prices,” shared a representative from a gold business.
Most recently, on October 7, the SBV issued gold import quota licenses with a total of 3 tonnes during the license validity of three and four days.
| The SBV’s Circular 22, which took effect on October 29, 2010, only allows credit organisations to mobilise capital in gold through issuing valuable papers instead of gold savings books as was done previously. Banks are only entitled to provide loans in gold for jewelry production and business, while gold loans for gold bar production and business is totally banned. (Table) |
