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Banker suggest establishing national gold exchange
If approved the Vietnam national gold exchange will be the place for official gold transactions for all institutions and individuals. Unlike the now defunct gold trading floors run by different finance institutions in the past, the national gold exchange rate will be a well structured “playing field” for investors with transparent rules.
Gold will be traded like stocks
The Bank for Investment and Development of Vietnam (BIDV) has submitted a plan to the Prime Minister to establish a national gold exchange. Under the plan, the exchange will be run by a unit belonging to the state under the status of a single-member state-owned limited company. The individuals and institutions, which demand to trade gold, will deposit gold at the gold exchange and place purchase or sale orders through the exchange’s transaction system.
The gold exchange will only provide the place, payment and delivery services, while it will not make transactions. There will be two kinds of the exchange’s members, including those who trade gold themselves and those who act as brokers. These will be various prestigious banks or enterprises.
The gold exchange will operate following regulations on transactions and payment systems as well as issues on stockpile, shipping and gold quality. The regulations on risk management and ensuring the transparency of the transactions on the market will also be established.
According to BIDV’s experts, the suggested model of the gold exchange has been built up based on a study of the structure of the domestic market and the exchanges of other countries. In particular, the experts considered the possibility of connecting Vietnam with the international gold market, and studied the operation and management models of the five gold exchanges with the highest turnovers in the world, such as COMEX in the US, TOCOM in Japan, MCX in India, DGCX in Dubai and SGE in China. The experts said they paid special attention to Chinese SGE, because China has similar characteristics with Vietnam. Chinese people also have the habit of hoarding gold and making in-kind gold transactions.
BIDV is a large financial institution that has significant experience in trading foreign currencies and gold and it also has experience with developing Vietnam’s stock market where it serves as the payment bank.
Standardizing the market
According to Nguyen Manh, Head of the Capital Division under BIDV, now is the right time to set up a national gold exchange. Currently, Vietnam is a nation with a very large number of gold investors in the world. If a national gold exchange cannot be set up, gold investors will be forced to make transactions on the flea market where they may face high risks.
With the existence of the national gold exchange, the management agency can reckon with the supply and demand of the gold market, the supply and demand of foreign currencies as well as volume of money used for trading on the market. The information will help it better manage monetary policies and make timely decisions in cases of emergency.
Once an official gold exchange becomes operational, the gold price here will be decided by supply and demand, thus helping minimize the activities of cornering and controlling the market. Besides, the gold exchange will also help reduce the demand for imports and restrict illegal exports.
Moreover, the national gold exchange will be the place where management agencies can supervise and regulate the gold market and make interventions in the market if necessary.
In reality, gold is not a valuable asset only kept by people but also by banks. As for Vietnamese people, gold has always been considered as the tool to preserve their assets. A survey by the World Gold Council released in 2009 showed that in 2006-2008, the gap between the purchased and sold gold volume in Vietnam was 30 tons a year. Meanwhile, the volume of traded gold on Saigon trading floor in the past once day reached the record high at 400,000 taels per day (a tael is equal to 1.2 oz).
Le Khac
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