Governor Nguyen Van Binh answers questions about the gold market

After 5 months of implementing Decree 24, credit institutions have bought back more than 60 tons of gold from people.

Governor Nguyen Van Binh (photo: Nhat Minh/VNEconomy)

Governor Nguyen Van Binh confirmed this this morning, November 13, when answering questions from the National Assembly.

Has limited the gold-ification of the economy

Delegate Duong Hoang Huong (Phu Tho) asked the Governor to come up with solutions to mobilize gold resources from the people; clarify the difference in domestic and international gold prices in recent times and handling measures.

According to the Governor, up to now, there has been no official survey on how much gold there is in the economy. But from the actual management activities, it can be estimated to be 250-400 tons of gold depending on the period. This number during the period of strong fluctuations is due to smuggling across the border. Currently, about 300 tons of gold are in the hands of the people.

According to the Governor's calculation, 1 ton of gold = 50 million USD. If there are 300 tons of gold, there are about 150 billion USD. We have a huge amount of money lying idle in gold, in the form of foreign currency. This resource is wasted, buried. How to mobilize it and not increase the goldization in the economy, how to make gold flow into VND. That is the goal set in the anti-goldification project. The foundation is Decree 24.

The data from May 25 to October 25 (after 5 months of implementing Decree 24) showed great results. The credit institution system bought back more than 60 tons of gold (30 billion USD) from the people. When buying back like that, gold was turned into money to serve the economy.

"If it weren't for the fourth quarter, which is usually due to liquidity stress, I'm sure that credit institutions would have to buy all the gold they owe people by November 25. Recently, seeing that in general, monetary policy should not increase tensions, they postponed it until June 2013 to ease tensions. Therefore, it is possible to buy more than 80 tons of gold this year. Initially, gold has been mobilized to serve the national economy and people's livelihoods," the Governor said.

The Governor recalled that gold was a lifeline for the economy in 2012. This time last year, the picture on the money market was completely different, commercial banks were still borrowing from each other at interest rates of 25-30%, even higher, the risk of liquidity loss spread throughout the system. Enterprises borrowed at interest rates of over 20%, at that time we set a target for enterprises to borrow at around 17-19%. Liquidity was extremely depleted.

At the same time, the National Assembly also approved the targets for 2012, we are worried because where will we get money to serve the country's economic development. Meanwhile, the international economic situation is very difficult. If we pump money out to ensure liquidity, there is no way to fight inflation... However, "Up to now, the initial fight against gold-ization has created a source of money to serve the economic development of 2012" - the Governor emphasized.

No more chance for gold smuggling?

According to the Governor, in the past, whenever the domestic gold price fluctuated, creating a difference up and down compared to the world gold price, it caused many fluctuations in the macro economy, affecting the exchange rate. If the domestic gold price was only 400,000 VND/tael higher than the world price, there would be speculation and gold smuggling across the border on a very large scale.

For many years, before Decree 24 took effect, 10-30 tons of gold were smuggled across the border each year. Each time there was such a difference, gold traders would collect gold on the black market, causing the black market for gold and foreign currency to operate very actively in previous years.

Every time such a phenomenon occurs, the exchange rate on the black market immediately increases, causing the exchange rate on the official market to increase as well. This causes the exchange rate to increase, affecting imports and exports. Because the openness of the economy is large, the trade deficit is large, affecting the prices of domestic goods.

Before Decree 24 was issued, our gold market was left open, no one managed gold bars. Gold bars were divided into many segments, each department and agency managed a segment of the whole market. For example, the State Bank was only responsible for managing imported gold and allowed to stamp gold bars. But once they were stamped into gold bars, they were considered normal goods.

Our country has over 12,000 stores trading in gold bars. When it becomes a normal commodity, businesses only need to state in their license that they trade in gold to be able to trade in gold bars. Gold bars are circulated very freely, considered a normal commodity. Such a legal environment makes market activities extremely inadequate.

Decree 95 (on administrative sanctions) was issued at the end of 2011 and Decree 24 has initially achieved its goal: Gold smuggling has been almost prevented. Since April, the foreign exchange rate has been stable. Domestic and international gold prices have gradually increased, now reaching 3 million VND/tael. The Governor commented: "If it were before, with such profits, this would be a great opportunity for gold smugglers. But now it does not affect the exchange rate, macro-economy, prices, or inflation."

Regarding the question of delegate Nguyen Van Tuyet (Ba Ria-Vung Tau delegation) asking the Governor to clarify the matter of the past, the fee for stamping SJC gold bars was 7,000-8,000 VND/tael, now that SJC has a monopoly, this fee is 50,000 VND/tael. The Governor said: he has asked the relevant departments to investigate, and has not seen anywhere, even SJC, that has ever had a stamping price of 7,000-8,000 VND/tael. Now, setting the price of 50,000 VND is a full calculation of the cost with SJC. Previously, SJC also had a price range, but when there was a fever in the market, all companies with gold bars came to stamp at SJC. There were opinions reflecting that SJC charged higher than 40,000 VND/tael.

"With this price, the State Bank can manage it and 50,000 VND is a reasonable level." Governor Nguyen Van Binh also affirmed that if the world gold market is connected, it will be accepted as gold speculation. "So it is confirmed that there is no connection" - the Governor said.

Immediately after the Governor finished his answer, delegate Nguyen Van Tuyet responded: “The Governor answered well and wisely. The Governor should not think that the people do not know anything. The 2011 Resolution stated that we should strive to not let domestic prices differ from world prices. The 2012 Resolution affirmed that international price linkage ensures the legitimate interests of the people. Does the Governor's answer contradict the National Assembly Resolution? Will the 60 tons of gold collected be used for production and business or will it be used to repay the people's debts when the State Bank does not allow gold mobilization?”

Responding to the delegates, Governor Nguyen Van Binh said: “The State Bank of Vietnam must import 15,000 tons of gold in 2010 to keep prices close. After that, no more gold will be imported because the legal environment has changed and the import is no longer practical.”./.

According to (vov.vn) - LT