SBV says will not stabilize gold price

The State will not sell out gold to stabilize gold prices as the yellow metal is not essential goods creating added value for the nation’s economy, said Le Minh Hung, deputy governor of the State Bank of Vietnam (SBV).

The viewpoint of the central bank indicates that local residents’ practice of holding gold brings about no benefits for the economy as a large volume of capital under the form of gold is not used effectively. The Government therefore has no intention of importing gold or using gold reserves to stabilize the local market, Hung affirmed.

In fact, gold imports will cause a large volume of foreign currencies to drain out of the country while the foreign reserves are very necessary for the economic development, Hung noted.

Also, the central bank will not ready to buy gold from commercial banks, he said.

The central bank will think twice in buying gold from commercial banks who have earlier bought the yellow metal from local citizens. SBV will only sell out gold to support certain banks having problem with gold liquidity but this doesn’t mean that the monetary authority will sell gold at low prices to stabilize the market.

The State will treat the precious metal as it has been dealing with foreign currencies, meaning it will shift from borrowing to trading gold to allow people to buy and sell gold at companies and lenders meeting required conditions. To have their assets kept safe, local people can use pay box rental services while credit institutions in the future are no longer allowed to raise gold to avoid potential risks.

Dinh Nho Bang, vice chairman of the Vietnam Gold Traders Association, said that stabilizing the gold market, if any, should be conducted on the basis of State macro management as the nation’s gold supply will never satisfy rising local demand.

The central bank now doesn’t have enough ability to stabilize gold prices, Bang said. For instance, the strong gold selling by five lenders in cooperation with Saigon Jewelry Holding Co. (SJC) conducted last year failed to close the gap between global and local gold prices as local demand surged, he clarified.

Economist Vu Dinh Anh, meanwhile, noticed that even the price stabilization programs for other essential goods were not as effective as expected, saying commodities prices are largely adjusted by macroeconomic conditions and market factors rather than the mere State intervention.

Besides, launching gold price stabilization will certainly fail to help minimize the gap between international and domestic gold prices, he insisted.

SBV will reschedule the ban for banks to stop gold mobilizing and lending until June 30 with an aim to facilitate the lenders to buy and mobilize gold and recover loans in gold to solve liquidity difficulty.

The central bank in the year to date has bought over US$10 billion while credit institutions have purchased 60 tons of gold from local people over the past five months. This is the reason why liquidity of Vietnam dong has become abundant in the previous months, meeting credit demand from local enterprises.

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