SBV issues rules to replenish gold supply

Deformed SJC gold bars and non-SJC gold bars meeting quality standards will be reprocessed into SJC gold under the supervision of the State Bank of Vietnam (SBV), the central bank announced on Thursday.

Specifically, Saigon Jewelry Company (SJC) whose brand is now under the central bank’s jurisdiction will process gold for the central bank at a fee.

The central bank will also dictate when to process gold bars, the volume to be processed and the sources of materials, according to Decision 1623/QD-NHNN on gold bar production issued on Thursday.

To produce gold bars from material, the central bank will sign an outsourcing contract with SJC when there is a demand. The gold processing will be supervised by the central bank’s inspection team, and SJC will hand over gold bars produced to the central bank.

The new rule is seen a move by the central bank to replenish local supply as the buying demand is running high these days.

Earlier, SJC has repeatedly sought approval from the central bank to reprocess those gold bars of this brand that have become deformed or scratched, as the gold trader said it did not have enough money to buy back all such bars while the amount of disfigured gold bars in its stockpile has amounted to thousands of taels. A tael equals 1.2 troy ounces.

Those wanting to convert non-SJC into SJC gold bars will have to seek approval from the central bank which will be given 30 days after the proposal is sent, and SJC will then send a reprocessing plan to the central bank within two days after the proposal is approved.

Under the decision, the HCMC Branch of the central bank will be in charge of receiving, sealing and preserving gold molds after this decision takes effect.

A representative of the State Bank said the decision aims to monitor the use of gold materials and to avoid gold of unclear origins being produced into SJC gold. The new rule also enables the central bank to control the gold supply and easily regulate the market when necessary.

Given the decision, the local gold supply will increase substantially as SJC will be able to reprocess 7,000 taels of disfigured gold bars and gold of other brands.

In related news, the central bank on Thursday also issued a document amending Article 1 of Circular 11/2011/TT-NHNN to ensure safety for banking operations related to gold. The central bank governor will consider and decide on the borrowing and lending in gold among credit institutions.

Previously, Article 1 did not allow borrowing and lending in gold between credit institutions and with customers. It also disallowed deposits in gold, making investment and offering loans in gold.

The amendment will help any credit institutions with temporary liquidity shortage can borrow from other institutions. This is seen as a move of the central bank to support credit institutions after huge gold withdrawals at Asia Commercial Bank (ACB) in a short time have made the bank fail to mobilize enough gold to repay depositors.

Local gold prices surged to around VND45 million a tael on Thursday due to a rally on global markets and high domestic demand.

SJC at 3:00 p.m. on Thursday quoted the yellow metal at VND44.4 million and VND44.6 million a tael for buying and selling respectively, up by VND970,000 versus a day earlier. The price has edged up by over VND2 million a tael since early this week.

Nguyen Cong Tuong, deputy sales manager of SJC, said gold demand shot up strongly on Thursday. SJC sold 5,800 gold taels while buying 5,400 taels. The previous day saw the firm selling only over 3,000 taels.

Gold closed at US$1,653 an ounce on the New York market on the previous night, rising by US$16 from the opening level. At 3:30 p.m. on Thursday, it stood at US$1,661 an ounce on the website www.kitco.com, US$7.7 higher than the level of the New York market.

SGT