Heavy loss because of keeping gold in safe

People who have kept gold in safes for the past five years have lost an average of about 11 million VND/tael.

Figures from the Foreign Exchange Management Department of the State Bank of Vietnam (SBV) recently cited by the press show that gold bar transactions on the market are currently at a low level. The average daily gold bar transaction volume recently reached only about 10,000 taels, down 75% compared to early 2013.

In particular, the amount of gold deposited in the form of safekeeping at credit institutions has decreased sharply. The total amount of gold deposited in banks in 2012 was about 160 tons, but now there are only about 2.86 tons left in the form of safekeeping.

Sending gold is both costly and inconvenient.

So when the gold is withdrawn from the banks, where does it go? According to the explanation from the State Bank of Vietnam’s Foreign Exchange Management Department, the above downward trend is mainly due to the fact that gold capital in the population has been strongly converted into Vietnamese Dong for investment, production, business and consumption.

From the perspective of a businessman, Mr. Nguyen Van Chinh, owner of a gold trading establishment in District 2, Ho Chi Minh City, said that it is understandable that people withdraw gold from the banking system. Since 2013, the State Bank has stopped gold mobilization and lending activities across the entire credit institution system. Since then, the amount of gold people have deposited at banks has only been in the form of safekeeping, and gold depositors do not receive interest but also have to pay gold deposit fees.

“In reality, only those who have little gold and keep it in a piggy bank choose to deposit it in the bank. For those who buy gold for investment or business, no one deposits gold in this case,” Mr. Chinh analyzed.

Ms. Tran Thi Hang, living in Phu Nhuan district,Ho Chi Minh City, used to deposit gold at the bank but now no longer do so because of the fees. “Not to mention that even though I accept the fee to deposit gold in the bank, withdrawing gold is very complicated. If you deposit gold at a branch, you have to withdraw it at that branch, and you have to notify the receiving time at least half a day to a day in advance. So there are times when the gold price increases, I want to withdraw it to make a profit right away but I can't, so I miss the opportunity" - Ms. Hang shared.

heavy loss

Dr. Nguyen Tri Hieu, a banking and finance expert, said that there are currently no exact statistics on what people use the gold they withdraw from the banking system for. However, one thing is certain: no one withdraws a large amount of gold from the bank (for example, several dozen taels of gold) and then puts it in a safe or hides it under the bed.

“They will convert that gold into money, then invest in real estate, stocks, dollars…” - Dr. Hieu commented.

Sharing the same opinion, Mr. Duong Anh Vu, a gold industry expert, analyzed that people who have a lot of gold after selling it to get money have invested their capital in many channels such as dollars, real estate, stocks or sold gold to get money to lend and do business.

Because if a gold investor hoards gold for the past five years, he will surely lose. Looking at the history of gold prices, this is very clear: The price of gold in 2012 was 48 million VND/tael, even reaching 50 million VND at one point, but now it has dropped to less than 37 million VND/tael.

Meanwhile, many other investment channels are quite profitable. For example, the dollar exchange rate in 2012 was around 21,300 VND/USD, now it is around 22,760 VND/USD. Over the past five years, land prices in District 2 and District 9 have increased by 300%. Similarly, the VN-Index in 2012 was 300 points, now it has increased to 800 points, meaning that if investors invest in the stock market, they can at least make a profit of over 150%.

“In general, just considering the four investment channels of gold, dollar, real estate and stocks, dollar is the least profitable but still more profitable than gold. Obviously, if you bought gold at a record price of nearly 50 million VND/tael and still insist on holding on to gold, then investors have suffered heavy losses,” Mr. Vu emphasized.

Mobilizing gold is not easy

Although many people have invested in other areas after withdrawing from the bank, many experts believe that the amount of gold kept in people's safes is still very large. According to the Vietnam Gold Business Association, the estimated amount of gold in the people is still very large, about 500 tons (13.3 million taels, equivalent to over 20 billion USD). Therefore, this association has proposed that the State Bank establish a national gold exchange; issue gold certificates or gold bonds to mobilize gold from the people to avoid wasting this amount of gold.

Recently, the Government Office continued to issue a document conveying the Prime Minister's opinion requesting the Governor of the State Bank to continue focusing on research and have appropriate solutions to mobilize foreign currency and gold sources from the people to serve investment and development.

Many experts and business people believe that this is the right policy to create resources for economic development, but mobilizing these resources from the people is not easy. One of the important reasons why people hold gold and USD is because of the fear of devaluation of the domestic currency.

Therefore, to mobilize gold from the people, to prevent them from storing their precious gold under their beds, we must make them feel secure in the local currency. When they are more confident, they will sell gold to deposit money in the bank to earn interest or invest in production and business.

In addition, it is necessary to consider raising interest rates on USD and gold deposits. According to Dr. Nguyen Tri Hieu, an economic expert: "People deposit gold without interest, or even negative interest rates because of the cost, then no one is excited anymore". In particular, to mobilize this resource, it is necessary to apply market principles instead of using administrative measures, that is, to create an increasingly favorable business environment so that people have more confidence to spend money to do business.

According to VNN