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New legal document will help stabilize gold and foreign currency markets
It is believed that the Circular No.22, forbidding commercial banks from lending cash against gold collateral, which took effect on October 28, will help stabilize the gold and foreign currency markets.
Le Tham Duong from HCM City Banking University said that the new legal document aims at easing pressure on the foreign exchange market, as well as lowering risks to the banking system.
The circular also clearly shows the central bank’s stance that gold must not be used as a payment tool.
The circular prohibits banks to convert capital in gold into cash to lend, and prohibits banks to lend gold to clients to fund their speculation and investment deals. Therefore, the circular will lead to the lower demand for loans in gold. This will allow commercial banks to ease the gold deposit interest rates in the time to come.
With the new circular, gold will lose its attractiveness, and people will inject money in other investment channels, including production and business, instead of pouring money into gold, Duong noted.
In the past, people rushed to purchase gold, because they believed they would make fat profit when the gold prices increase. Besides, they could deposit gold at banks to enjoy the interest rates of 1-1.5 percent per annum.
If the gold deposit interest rates decrease, or commercial banks charge fees on gold depositors, people would sell gold and hold cash instead, Duong said.
Once the gold speculation eases, the dollar prices would not increase sharply as seen in recent days.
There always exists a close link between the dollar and the gold prices. Recently, when the domestic gold price was higher than the world price, speculators tried to collect dollars on the black market to import gold illegally, thus causing dollar price fever fits. Meanwhile, the more expensive dollar has pushed the gold price up.
Some experts have expressed their worries that once the gold deposit interest rates are kept at low levels, people would rush to withdraw gold from banks. As the result, banks will not have enough gold to pay to depositors. They will have to collect gold on the market, which will then lead to sharp price increases.
However, Duong does not think that this will happen. Commercial banks have six months ahead to implement the newly issued legal document, therefore, the new regulation would not create “big waves” on the market.
Nguyen Thi Kim Xuyen, Deputy General Director of Dong A Bank, who shares this view, said that the bank is well prepared for the new regulation and that the new regulation will not have big influence on banks and the market.
Xuyen does not think that people would draw gold deposits, because it would be unsafe to keep them at home.
Xuyen said that Dong A Bank will consider easing gold deposit interest rates if other banks lower their interest rates.
In the latest news, the gold price continues its upward trend. The gold price, after making a record when hitting the 33.37 million dong per tael late last week, on October 30, has soared to a new peak. SJC brand gold in HCM City was traded at 33.37-33.42 million dong per tael this morning, or 50-70,000 dong per tael higher than Saturday. Meanwhile, the dollar price jumped to 20,500 dong per dollar.
Nhu Ngoc
vietnamnet
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