Vietnam to Put an End to Gold Trading
Source: Financial Times, Tim Johnston (1/1/10)
"Vietnam has ordered all gold trading floors to close by the end of March. . ."
"Both the owners of the gold-trading floors and traders are doing their transactions on a fragile foundation that lacks legal, economic and technical frameworks and knowledge," the government said in a statement.
The order also bans using overseas accounts, but does not affect jewelry or retail gold sales.
The government said it was particularly concerned that some investors had been drawn into overleveraging their positions by low interest rates and the ever-increasing price of gold, which has risen from $660/oz when the first trading floor was started in 2007 to almost $1,100/oz today.
The government said that in some cases, investors had only been required to put up 7% of the value of their portfolio.
The regulation will affect around 20 gold trading floors, but it is unclear if the government is intending to rewrite the regulations and allow the floors to reopen or if the move is long term.
The trade has become a lucrative source of income for many of the banks and trading houses that have opened the exchanges, and the ban could hit profits. But analysts say it could free up liquidity that might flow back into the stock markets, lifting the index.
Gold has a special place in Vietnamese investment portfolios. It often plays a key role in hedging property transactions, and historically provided a buffer against political uncertainty.
Today, Vietnam is one of the world's largest gold consumers. The Vietnamese buy a similar amount of gold per head as the Germans, who have a GDP per capita more than 40 times greater.