Experts ponder gold hoarding
HCM CITY (VNS) — To help mobilise more gold from the public, the macro-economy must become more stable, urged several experts who spoke at a seminar organised by the International Business Knowledge Corporation and Viet Nam Gold Traders Association yesterday in HCM City.
The issue of gold mobilisation has become a hot one as the deadline for issuance of short-term gold certificates by credit institutions falls on November 25.
Vo Tri Thanh, deputy director of the Central Institute of Economic Research and Management, said it was critical to decide how best to mobilise the large amount of gold held by the public.
Vietnamese residents hold between 500-1,000 tonnes of gold.
"Gold mobilisation is about solving problems such as macro-economic stability, investment flows and the guarantee of benefits for gold depositors," he said.
However, the Government, which is keen to mobilise gold from the public stock, must have transparent policies, an efficient system to mobilise gold, and strict supervision and inspection schemes in place.
Nguyen The Hung, general director of Viet Nam Gold Trading and Investment Joint Stock Company, said that if even half of 500 tonnes of gold held by the public was mobilised, the State would have more than US$10 billion in foreign currency.
That would decrease loan pressure from international financial organisations, he added.
The aim of gold mobilisation is to increase the gold-reserve ratio of total foreign currency reserves, which would help the State Bank of Viet Nam ( SBV) become more active in market regulation. This in turn would prevent further price hikes in markets.
He said that to create public trust and reduce the hoarding of gold, the macro-economy must be stabilised and inflation tightly controlled.
A legal framework for gold mobilisation is also necessary, as well as better information for the public. This would help people feel more secure in depositing their large gold holdings.
He said the state should consider applying an interest rate on gold deposits to ensure benefits to the public.
However, Pham Do Chi, former expert at the International Monetary Fund, said the Government must thoroughly consider the consequences of gold mobilisation.
If huge amounts of gold are mobilised, the State must consider how to maximise the value of this source to help boost economic growth, he added.
Gold hoarding can have the effect of "rescuing" the economy, Chi said. When people keep gold, they feel more free in their spending and this could help businesses thrive during difficult economic times.
He said gold mobilisation should not be mandatory, and that the State should limit using gold as a means of payment so that the status of the Vietnamese dong remained stable.
The central bank uses gold to transfer into dollars and then into Vietnamese dong to lend at 9-10 per cent interest per annum, with the expectation that this gives a big boost to the economy. But this could be financially suicidal, some experts say.
"If the price of gold goes up strongly as predicted, how can the national banking system repay the gold bullion to depositors?" Chi said.
Experts said commercial banks would issue debentures and bonds to mobilise gold deposits from the public.
They also said that the State should find ways to narrow the gap of gold price between the domestic and global markets.
On June 24, the SBV issued Document No. 3854 to require credit institutions to terminate gold mobilising and lending.
Credit institutions are only permitted to issue short-term gold-denominated certificates in cases where the amount of gold-loan collection and gold inventory is not sufficient to make repayments. However, this will end on November 25 when the decision goes into effect. — VNS