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Gold shops turn into pawnshops to flout bullion ban
With their gold bullion trading activities set to be completely banned in the next six months, many gold shops have switched to functioning as pawnshops to slip through the law loophole to continue trading in the precious metal.
Gold shops are still allowed to trade gold bars for the next six months, after which only a few qualified facilities are eligible to maintain operation, according to Decree No 24, taking effect on July 1.
Qualified gold shops, as stipulated by the decree, are those that have a total registered capital of at least VND100 billion (US$4.8 million), a VND500-million contribution to the state budget in the last two years, and a branch network in at least three cities or provinces.
While it is still half a year to go, industry insiders said gold trading is no longer an attractive business, and they thus had to turn to the pawn sector.
“Some 50 percent of gold shops in the city are now also operating as pawnshops,” said an owner of a gold facility in Ho Chi Minh City’s District 8.
Meanwhile, another shop owner in Tan Binh District also said his main source of revenues these days is from pawning activities, rather than selling gold.
“Trading volumes on SJC gold bullion has slumped, and I also lost a great number of customers as the products’ creator, Saigon Jewelry Co, now refuses to buy back deformed bars,” he added.
SJC gold bullion has been chosen as a state brand name, after the government acquired the exclusive right to process gold bullion.
“Once the ban takes effect, gold shops can still manage to trade gold bullion under the disguise of a pawnshop,” he said.
“If authorities detect, we just say the gold is traded under a pawn contract.”
“It will be difficult for authorities to tell the pawned gold bullion from the traded one at the gold shop cum pawnshop,” the deputy head of a gold trading company in District 1 said.
Expanding network
While unqualified shops have been finding ways to maintain their gold trading activities, the eligible companies have also been luring smaller facilities to operate as their dealers, though this cooperation is prohibited by the State Bank of Vietnam.
Small gold trading facilities account for 70 to 80 percent of the total gold bullion trading volumes of large companies. And these will be removed from the market once the ban takes effect.
In a typical model, a small gold shop will be functioned as a branch of a business qualified for trading gold bullion, with its employees dressed in the company’s uniform and allowed to trade the precious metal, a CEO of a gold company said.
“Ineligible shops will be able to continue trading gold, while the large companies can spread their image without having to spend a single cent in investment,” he said.
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