New ruling fails to rouse gold market

The State Bank of Vietnam's prohibition on gold deposits took effect on November 25 and was expected to persuade people to sell gold to banks rather than hoard it.

Now banks charge a fee for safekeeping of customers' gold.

The rationale was that customers would avoid keeping the gold if they had to pay for it, and would rather sell it off, increasing supply in the market.

But bullion sales barely increased in the last week.

Only 10 and 15 percent of the gold withdrawn from banks was sold, a gold trading company based in HCM City's Tan Binh District said.

Consequently, the price of the precious metal remained at between VND47- 47.15 million per tael on November 30.

Earlier the gap between global and domestic gold prices was only VND3.2-3.3 million per tael (37.5gm), but since the banks stopped accepting gold deposits it has risen to VND3.7 million, with local prices being higher.

An analyst said this was because some banks had to buy 20 tonnes of gold bullion to return to their customers while supply was low.

The big gap in prices will continue if supply does not improve, he warned.

The banks' safekeeping services, which cost 0.01-0.05 percent of the value, has failed to elicit interest.

Nguyen Hoang Minh, deputy director of the State Bank of Vietnam's HCM City branch, said people have yet to get used to the new concept since for a long time they were paid interest for depositing gold.

He also revealed that only eight banks and 13 companies have registered for gold bullion trading, a tiny number considering 12,000 companies involved in gold trading.

But analysts are optimistic that the gold market will see a distinct improvement in early 2013 when banks completely stop trading gold bars.