The Vietnam Association of Financial Investors (VAFI) has called on the State Bank of Vietnam (SBV) to scrap plans for establishing a national gold trading floor, saying it would not benefit the economy.
The national gold trading floor, proposed by the Vietnam Gold Business Association and several experts aiming to remove the gap between world and domestic prices and prevent gold "fever", has stirred up controversy.
In a letter to the SBV on August 16, VAFI said the gold trading floor would encourage the flow of cash into gold, which would undermine the strength of the national currency.
According to the association, almost 99 percent of individual investors suffered losses when trading gold via accounts.
Nguyen Hoang Hai, general secretary of VAFI, said that in other countries, gold trading floors were set up as part of commodities exchanges, in which groups, organisations and companies operate in a healthy way, unlike individual investors in Vietnam.
The association also disagreed with the SBV's proposal to allow commercial banks to borrow gold from citizens, which they would then, in turn, loan to individuals or businesses.
Hai said that scrupulous businesses would not choose to add capital by borrowing gold and then selling it for Vietnamese dong as this method was too risky in the context of fluctuating global and domestic gold prices. The proposal could also cause extreme speculation or even market chaos.
VAFI also suggested that the central bank should continue to ban gold bar trading by individuals, and allow only authorised agencies to buy gold bullion from citizens.
Hai added that the previous draft decree had helped stabilise the gold market by reducing gold trading transactions by 70 percent while removing major gold speculation.
Gold export and import quotas needed to be removed in order for the domestic gold market to operate more effectively, VAFI said.
In the past few weeks, continued increases in gold prices both inside and outside the country triggered a frenzy of buying and selling by individual investors, causing chaos in the domestic gold market.
The world spot gold price hit a record US$1,817 per ounce last week on the London Bullion Market.
At the same time, the domestic gold price climbed to a record VND46.3 million (US$2,226) per tael (one tael is equivalent to 1.2 ounces).
Speculators have taken advantage of the fluctuating gold prices, raising the domestic price more than VND1 million (US$50) per tael above the world price.
The chaotic situation also adversely impacted the forex market, creating tension in the supply and demand of foreign currency.
According to VAFI, gold trading is considered a very sensitive field which could affect national monetary security, and cause inflation and fluctuations in currency exchange rates, and lower public confidence in the State's management of the sector.
In a letter to the SBV on August 16, VAFI said the gold trading floor would encourage the flow of cash into gold, which would undermine the strength of the national currency.
According to the association, almost 99 percent of individual investors suffered losses when trading gold via accounts.
Nguyen Hoang Hai, general secretary of VAFI, said that in other countries, gold trading floors were set up as part of commodities exchanges, in which groups, organisations and companies operate in a healthy way, unlike individual investors in Vietnam.
The association also disagreed with the SBV's proposal to allow commercial banks to borrow gold from citizens, which they would then, in turn, loan to individuals or businesses.
Hai said that scrupulous businesses would not choose to add capital by borrowing gold and then selling it for Vietnamese dong as this method was too risky in the context of fluctuating global and domestic gold prices. The proposal could also cause extreme speculation or even market chaos.
VAFI also suggested that the central bank should continue to ban gold bar trading by individuals, and allow only authorised agencies to buy gold bullion from citizens.
Hai added that the previous draft decree had helped stabilise the gold market by reducing gold trading transactions by 70 percent while removing major gold speculation.
Gold export and import quotas needed to be removed in order for the domestic gold market to operate more effectively, VAFI said.
In the past few weeks, continued increases in gold prices both inside and outside the country triggered a frenzy of buying and selling by individual investors, causing chaos in the domestic gold market.
The world spot gold price hit a record US$1,817 per ounce last week on the London Bullion Market.
At the same time, the domestic gold price climbed to a record VND46.3 million (US$2,226) per tael (one tael is equivalent to 1.2 ounces).
Speculators have taken advantage of the fluctuating gold prices, raising the domestic price more than VND1 million (US$50) per tael above the world price.
The chaotic situation also adversely impacted the forex market, creating tension in the supply and demand of foreign currency.
According to VAFI, gold trading is considered a very sensitive field which could affect national monetary security, and cause inflation and fluctuations in currency exchange rates, and lower public confidence in the State's management of the sector.
VNA/VOVNews
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