Lower gold prices in VN encourage smuggling

Friday, Mar 11, 2016 14:43

Less buyers visit gold shop recently as local investors are not showing much interest in buying the yellow metal. — Phoho petrotimes.vn

HÀ NỘI — Local gold prices slipped below global prices on March 11 for the first time since 2010, a rare event because of the contrasting demand between the two markets.

In the morning, one tael of the state-owned brand SJC gold bar was sold for VNĐ34.06 million (US$1,525) in the Saigon Jewellery Company, which offered to buy one tael of gold bars from buyers for VND300,000 less than the selling price.

At the same time, on the global gold trading floor Kitco.com, one ounce of gold was sold for $1,271.3 or VND34.36 million per tael (one ounce = 1.205 tael; one US dollar = VND22,350).

So, the price of one tael of gold in Viet Nam was VND300,000 less than the world market price. Vietnamese gold prices have always been higher than the global market prices by VND2 million to VND3 million per tael. In 2010, the price gap peaked, ranging between VNĐ5 million and VNĐ6 million per tael.

Regarding the low demand from domestic traders, though the local gold prices also rose in the last two days, the increase was much lower than the global ones.

On March 11, each tael of gold added between VND100,000 and VND300,000 in price.

According to Phu Nhuan Jewellery, the sentiment towards gold investment is changing in Viet Nam. Earlier, the investors actively traded their gold in the local market when they saw a rise in global prices. Now, the investors are not showing much interest in buying the yellow metal.

According to reuters.com, gold climbed to a 13-month high on Friday, buoyed by the euro's gains after the European Central Bank (ECB) signalled it was done cutting interest rates for now.

Bullion climbed 1.5 percent on Thursday, its largest single-day gain in a week, and was on course for a second weekly rise. For the year, gold has added more than 20 per cent in the global market.

Gold smuggling

Lower gold prices are much more stable, thanks to government decree No 24, which introduced a state monopoly in gold bar production and gold material imports and export since 2012, for better control over the local market and deals with speculators and the ‘goldenisation' of the market.

However, when the gold fell, as it has now, many official traders who saw reduced business in the local market and no opportunity to export their gold thought about cross-border gold smuggling to gain from the price difference.

Nguyen Hoang Minh, deputy director of the HCM City State Bank branch, told local media that the city police had informed the bank about gold smuggling across the borders. However, these involved a very small volume of gold, comprising mainly gold jewellery and not bullion or material gold, Minh said, adding it could not have a negative impact on the Viet Nam market.

Minh said the current SBV ban on gold export as well as tax policies did not make it the right time for gold export that could help bring profit to local gold traders.

Minh said SBV would continue to research for solutions and suggestions that could both support businesses and stabilise the gold market and foreign currency. — VNS

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