Gold loans fall as prices dip

Friday, Aug 01, 2014 09:05

Customers buy gold at Bao Tin Minh Chau Jewellery. Gold loans at 10 commercial banks in HCM City stood at 157,317 taels by the end of June, an 11 per cent decrease over last June. — VNS Photo Doan Tung

HA NOI (Biz Hub) — Gold loans at 10 commercial banks in HCM City stood at 157,317 taels by the end of June, representing an 11 per cent decrease over last June.

Each tael equals 1.2 troy ounces.

Thoi bao Ngan hang (The Banking Times) reported that the volume of gold loans may require more attempts to encourage clients to convert gold into Vietnamese dong, which the State Bank of Viet Nam would like to see.

In principle, the central bank ordered commercial banks to close accounts of deposit and loans on gold on June 30th, 2013. However, it was not bankers who could make that decision. Terms of gold loan contracts were quite long and clients often did not want to end contracts before their maturity.

To wipe the slate clean, banks offered to exempt charges for overdue interest payment for clients who borrowed gold at 5 to 7 per cent yearly in 7 to 10 years.

However, banks reported that such a solution was not working out since a large number of clients were jewellery processing firms and real estate developers. They were supposed to pour capital into projects and ran out of money to pay the loans.

A representative of an HCM City based bank said that the picture might get brighter if gold prices fell. At lower gold prices, clients would benefit from the lower values of gold loans.

Local gold yesterday dipped by 0.2 per cent to set at a one-month low between VND36.56 and 36.68 million (US$1,724-1,730) per tael.

The loss was driven by a decline in world gold prices to below $1,300 per ounce, as investors nervously awaited the end of US Federal Reserve's two-day policy meeting yesterday to see if the central bank would raise interest rates faster than expected.

Spot gold was down 0.4 per cent at $1,299.10 an ounce after rising to as high as $1,312.10 earlier in the day.

Banks quoted the US dollar between VND21,195 and 21,270, up VND5 to 10 against Tuesday. — VNS

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