VietNamNet Bridge – The State Bank of Vietnam last week submitted to the government the plan to control the gold market, which has been described by analysts as the “pincer’s handle” that drives the gold market on the right track.
Despite a lot of great exertions made in the last many years, the government remains powerless in controlling the gold market. The market gets chaotic any time when the prices fluctuate. When the prices go up too dramatically and people rush to buy gold, the State Bank usually grants quotas of importing gold to enterprises, hoping that the supply increase will cool down the price fever attacks. However, the solution proves to be not useful in all cases.
In an effort to re-organize the gold market, the State Bank has compiled a new decree on gold market management. The bank plans to keep stricter control over the gold market and make strong intervention into the market when necessary, in order to prevent speculation activities, restrict the trade of bullion gold, while still ensuring people’s right to hoard up and trade gold.
Regarding the bullion gold production, the State Bank has stated that it will keep strict control over the production. It will set up stricter requirements on gold producers in order to cut down the number of enterprises making bullion gold. In general, the central bank does not encourage bullion gold trade.
The State Bank will also keep strict control over the export and import of gold materials in order to control the export gold volume which serves the regulation of the supply and demand, helps restrict illegal imports and exports and speculation.
The management over fine art gold trade will also be tightened, while this will be considered a conditional type of business. As for gold trade on accounts, the State Bank will consider every concrete case and make decision based on the market conditions.
Experts believe that the stricter control would create two immediate impacts. First of all, this will help cut down the number of gold traders, while only the most capable ones would be able to exist. This will help create a better market which is easier to be managed.
Second, the market will bear the direct and strong intervention from management agencies. Of course, the “rules of the games” will be stricter.
Only several years ago, when the bullion gold market got chaotic because of the price increases, speculations and the low quality of illegal imports, did the government agencies realize that the gold market, a very important market, did not bear a tight discipline. Every ministry and branch just keeps control over a small aspect, while they did not cooperate for effective management.
Due to the improper market management, the gold trading once got chaotic. Analysts said that the gold market once performed just like a small vegetable moving market.
In 2008-2009, when the gold trading on accounts clearly brought big consequences to the gold market, exchange rate and macro economic stability, and management agencies checked legal documents on gold market management as per the request by the Prime Minister, did they realize that there had been no legal document which allows or prohibit the trade activity.
A perfect legal framework on the gold market management is the thing which has been long awaited by the community. However, experts have pointed out that the legal framework is just one of the necessary conditions to ensure the smooth operation of the gold market. The legal framework still needs to be implemented in reality, or the current problems will never be settled.
Analysts have every reason to keep worried about that. A perfect legal framework has been set up to regulate the foreign currency market, but the market still bears uncertainties. The bank interest rate has been regulated by a lot of regulations, but banks and depositors still break the laws. Therefore, it will be not easy to control the gold market until people have confidence on the stability of the local currency value.