Challenge for the new Governor: Return gold to the market!

We must consider returning gold to the market, but also deal with interest groups when there is no longer a monopoly on gold bars. This is a big challenge for the new Governor Le Minh Hung when he sits in the "hot seat" of management.

Dr. Nguyen Duc Thanh - Director of the Research and Policy Institute (VERP) affirmed when answering an interview about the challenges in managing the gold market with new Governor Le Minh Hung.

Mr. Thanh said that the recent term of former Governor Nguyen Van Binh was successful in separating gold from circulation. At that time, when the gold market was “stormy”, the solutions that the monetary authority proposed to “restrain” the gold price, in order to resolve the emergency situation, were reasonable.

Return gold to the market

Gold has been separated from circulation, so are there any challenges from gold that the new Governor cannot ignore, sir?

Dr. Nguyen Duc Thanh: I still maintain the view that separating gold from circulation is a completely correct policy of the State Bank of Vietnam (SBV). This is something that no previous Governor has been able to do. In the context of the economy falling into "boiling water" and great macroeconomic instability, the SBV had to use strong measures, especially putting the gold bar market under very tight control. But now is the time for the new Governor to consider handling this issue, which means gradually returning gold to the market.

Separating gold from circulation is one thing, but returning gold to the market means forming a true gold market. Just like the foreign exchange story, when calculating the separation of the US dollar from circulation, the foreign exchange market must be developed even more.

Therefore, I think the State Bank's goal here is to build a freer gold trading market, not the current state.

Therefore, this is a big challenge and a heavy burden for the new Governor Le Minh Hung when he sits in the "hot seat" of management. Moreover, this is not only the responsibility of the new Governor, but also the responsibility of the entire SBV, and is a task set for this term.

To quell the previous “chaos” in the gold market, the State Bank of Vietnam proposed a solution to reduce gold bars and keep only one national gold bar brand, SJC. But as you said, we have to build a market for gold, which means we need more “goods” to trade?

Of course. It is true that when dealing with the situation, at that time the State Bank had to come up with a solution to narrow down to a single national gold bar brand. But if we consider the “market” aspect, it is not appropriate, so in the current market context, the State Bank needs to consider returning gold to the market and the State will no longer intervene.

Gold is also a commodity, a type of asset, so it must be returned to society and the market. And for the market to operate normally, there are many types of goods and many brands. Returning gold to the market is not difficult, but the difficulty lies elsewhere.

What exactly is the difficulty you are referring to?

Dr. Nguyen Duc Thanh: That is, when a policy is born, there will always be interest groups that benefit from that policy, and there will always be groups that do not benefit. This is true for all policies. Therefore, when a policy is changed, there will be groups whose interests will be affected, and they will find ways to prevent the change from happening. If no group prevents it, changing the policy is very easy.

At the same time, if the new policy is born, there will be new problems with new interests. Can the State Bank control those groups or not, so that they do not manipulate the gold market like before?

The problem is that the SBV can identify where these obstacles lie, determine when and how to change the policy, and anticipate the possibilities. And when implementing, can it overcome the obstacles of related interest groups to further perfect the gold market? In principle, the SBV will have to do it and can do it, the only question is how proactive and suitable it is to practical requirements.

Returning gold to the market with many gold brands is normal, and the situation cannot be allowed to last forever.

If we avoid doing what society demands, we will turn victory into defeat. I think this state cannot last forever, but if it continues, it will cause unnecessary turmoil and tension in society.

If the new leadership of the State Bank under the new Governor can do this job neatly, both maintaining the results of separating gold from circulation and returning gold to the market as a normal asset, it will be a wonderful step of inheritance and development.

Gold speculation declines, but remains active

For a long time, the State Bank has not made any new regulations, so it seems that the State Bank is confident with gold?

The world is not interested in gold now because there is no need to take refuge in gold anymore, and the people in the country are not as interested in gold as before. This is the right time to reform the gold policy, because there is a lot of room.

Many people believe that since the gold market has been “managed” by Decree 24 on gold market management, speculation has been eliminated. From your observations of the market, do you agree with this view?

I think there are many reasons to evaluate whether gold speculation still exists or not. Gold brands dominate one place, holding gold becomes risky because we do not know how policies will change, etc., making gold no longer an attractive investment channel, speculation decreases, but not absolutely. Because underground transactions still exist, because as long as gold products do not carry a brand but still have benefits in trading, exchange, storage value, etc., there will still be people interested in this field. It is very difficult to affirm that gold speculation no longer exists.

Speculation on national branded gold bars may no longer be clear, but the market for alternative assets will continue to exist and deform. Therefore, I think it should be returned to the market in a normal way.

The period before resolving the turmoil of the gold market had the mark of the new Governor when he was still the Deputy Governor of the State Bank in charge of this area. What do you expect from the new Governor in the future to thoroughly resolve the existing problems with the gold market?

I hope so.

Thank you!

According to Infonet