Tightened status necessary for controlling gold market
According to Associate Prof. Nguyen Huu Huan, senior lecturer at the University of Economics in Ho Chi Minh City, the nature of Vietnam’s gold market, especially in the southern region, involves small gold shops purchasing from wholesale traders. These wholesalers set the prices for transactions with smaller gold shops.
Huan noted at last week’s seminar on gold management, “These large wholesalers have the ability to control market prices. They can set the market prices because they hold a significant portion of the market. Economically, these entities are referred to as market makers or, more negatively, as speculators who manipulate the market.”
These types of wholesalers have been controlling gold prices even before gold management rule changes in 2012. They influence all forms of gold, from bars to jewellery, and even raw gold. This longstanding control underscores the need for stricter regulation to ensure market transparency and prevent manipulation.
Likewise, Pham Xuan Hoe, general secretary of the Vietnam Leasing Association and former deputy director of the Banking Strategy Institute under the State Bank of Vietnam (SBV), highlighted that “market makers” hold large quantities of smuggled gold, enabling them to manipulate the gold market and drive up free-market exchange rates.
Hoe acknowledged the SBV’s initial success in stabilising the gold market by narrowing the gap between domestic and international prices through direct sales to the public via five state-controlled entities.
“However, there are signs these market makers are attempting to disrupt market stability. Instances of hired queues for gold purchases and large shops lacking gold indicate deliberate hoarding, anticipating a halt in the SBV’s stabilisation efforts, which would then drive up domestic prices,” Hoe said. “We must anticipate this scenario and implement comprehensive solutions. If we don’t address the issue thoroughly, we risk being caught off guard.”
Nguyen Thanh Ha, chairman of SBLAW, explained that gold trading businesses must list prices and comply with SBV regulations. The Law on Anti-money Laundering mandates reporting all transactions of VND400 million ($16,000) or more to authorities. Additionally, all gold transactions must be documented with electronic invoices linked to tax authorities.
“To further enhance regulatory measures, the government recently introduced a new mechanism on non-cash payments, outlining measures for payment intermediaries and defines the roles of state agencies and businesses in facilitating transactions through banking systems or non-cash payment methods to support anti-money laundering efforts,” Ha said.
Since the SBV began stabilising gold prices by selling directly through four commercial bankss and SJC, instances of people queuing to buy gold have been reported.
To mitigate security issues, these entities now only sell gold to individuals registered with sufficient information online. Despite these efforts, proxy gold purchases and black market transactions have surged, highlighting the ongoing challenges in achieving market stability and transparency.
“This indicates that a significant number of individuals are trading gold without disclosing personal information or are purchasing substantial amounts of gold. This represents a grey area in anti-money laundering and tax evasion that requires stricter regulation,” Ha stated.
Nguyen Van Phung, a member of the Vietnam Association of Accountants and Auditors, remarked, “In recent years, the government has intensified efforts against corruption and negative practices. Many major cases have been uncovered through banking transactions. If gold transactions are conducted in cash without invoices, they will become a new avenue for illegal activities. Those queuing to buy gold on behalf of others are essentially abetting illegal activities.”
On the other hand, some market watchdogs also agreed on the necessity of effective gold market management to combat underground economic activities, illegal transactions, and money laundering. They recommended the state employ tools such as invoices and non-cash payments to enhance transparency. Store computers should be connected to the tax authorities to issue invoices immediately after each transaction, preventing money laundering by malicious actors.
Meanwhile, Hoe of the Vietnam Leasing Association argued for a more comprehensive approach to gold trading. “Merely regulating non-cash payments and gold invoices is insufficient. In the long term, all citizens with income must transparently declare earnings to identify cross-ownership or proxy gold purchases,” he said. “In a developing economy like Vietnam, proxy gold purchases with proper invoices and documents are still entirely legal. However, a ceiling must be set for gold transactions. Only when the cash ratio to total means of payment is very low can we effectively control money laundering.”
Source: https://vir.com.vn/