Some commercial banks have recently narrowed their gold bar trading network in the context of declining consumption demands for the product in the local market.
Bank for Investment and Development of Vietnam (BIDV) has announced to suspend gold bar trading at its nine branches since May 15 after being allowed by the State Bank of Vietnam. Some experts said this bank’s decision is reasonable due to a decline in gold bar consumption.
Besides BIDV, many other banks have also narrowed gold trading at many of their branches due to a fall in revenue from the business.
On May 14, the HCM City branch of Orient Commercial Bank (OCB) said it would conduct transactions worth at least a tael of gold and that customers would have to wait for one to two days to receive gold bars as there is no gold bar available at the branch.
A senior executive at a joint stock bank in HCM City said bank branches in large cities such as Hanoi, HCM City and Danang could still generate revenues from gold bars but the figures are equal to one tenth of those in previous years. In mountainous and remote areas, gold bars can hardly find buyers.
Bullion trade results have not been included in reports on performances of some banks which used to be big players in this sector. The sector is no longer attractive to banks due to high expenses, large capital but few transactions.
According to a report by the World Gold Council (WGC), the gold demand worldwide plunged to the lowest level in 10 years with 973.5 tonnes in the first quarter of the year, down 7 percent over the previous quarter.
Though no data on the demand for gold bars in Vietnam in January-March and last year is available, experts said the demand is falling.
A representative of Phu Nhuan Jewellery Joint Stock Company (PNJ) said 300-400 taels of gold are traded a day compared to the previous 700-800, even 1,000 taels.
In the past five years, the central bank has succeeded in reducing the importance of gold in the economy and stabilising the gold market. Gold price movements no longer affect foreign exchange rates and, thus, economic stability. The precious metal is also no longer the attractive asset class it used to be.
SBV is also collecting feedback for a decree on gold trading, which will include a monopoly for the central bank on accepting gold deposits.
The new decree will supersede Decree No.24/2012/ND-CP and get rid of certain conditions for companies that make gold jewellery.
Along with the task of continuing to manage the bullion market, the new decree also aims to simplify administrative procedures and scrap some of the conditions for issuing licenses to gold businesses.
Businesses which make gold jewellery and fine arts will only need to meet the establishment conditions and register for production, with other rules pertaining to certificates of production and technical facilities set to be eliminated.
More than 5,800 businesses have obtained certificates of eligibility for gold jewellery and fine art production from the central bank based on Decree No.24.
For gold bullion trading too, the SBV is set to ease regulations to reduce unnecessary expenses for enterprises. But the central bank will have a monopoly in mobilising gold deposits from organisations and individuals and trading gold on account.
Commenting on the SBV’s monopoly on mobilising gold deposits from the public, many experts agreed this is necessary to efficiently manage the gold market and foreign exchange rates.
