Speaking to the Daily, a leader of the central bank said gold mobilization would be very risky in terms of price. There has been no precedent for governments in the world to raise gold.
If the yellow metal is converted into currencies, the Government would face double risk due to exchange rate volatility. Gold deposits at foreign banks come with long terms, say, nine months to one year, and low interest rates but citizens prefer placing short-term deposits.
When depositors withdraw their gold, the SBV would have to import gold to pay for them if it does not have sufficient gold in stock. This will impact the foreign currency position of the central bank, the leader explained.
The SBV in recent years has stuck to a policy to mobilize the yellow metal via trading. Citizens are allowed to trade gold at licensed enterprises and credit institutions or pay fees for the gold keeping service.
In recent years, the gold market has been dismal as the public has shown less interest in the metal. As a result, banks and gold trading companies have reported sluggish transactions.
The domestic gold price has been lower than the global level though the central bank has not intervened in the market.
In addition, the association suggested the central bank set up a national gold trading center to mobilize gold from the public. Placed in HCMC and Hanoi, the center should be like a stock exchange and investors should be allowed to trade gold in the form of certificates.
The association suggested the SBV establish a joint stock company to oversee the center and develop technical infrastructure to manage gold transactions.
However, the leader said the central bank has not weighed any scheme to establish such a gold trading center as suggested by the association.
The actual gold quantity held by local residents remains unknown. In 2010, Huynh Trung Khanh, a member of the World Gold Council, estimated the figure at 500 tons.
The gold market has turned volatile in the past six years due to many intervention steps taken by the central bank. Decree 24/2012/ND-CP has made the gold market less attractive as it limits bullion trading points and picks SJC as the national gold brand.
Besides, the central bank’s organization of gold auctions in 2013, which aimed at putting an end to gold lending and mobilization, also affected the gold market.
Banks also took a hit from gold mobilization between 2011 and 2013. At present, DongABank is still struggling with huge losses caused by gold price fluctuations in previous years, when it had to buy gold overseas on trading accounts to pay for gold depositors.