Private gold traders and large firms have witnessed their businesses going down the tubes due to the new decree on gold trading control starting from May 25.
Private gold traders suffering tough times
According to Decree 24/2012/ND-CP signed by the prime minister, just a few enterprises will be eligible for gold bar trading with business certificates granted by the central bank.
Gold firms are required to be established and operate in line with the prevailing laws with chartered capital of at least VND100 billion. They are requested to have at least two years’ gold trading experience, tax payments of VND500 million annually in the last two years, and branch networks in at least three centrally-governed cities and provinces.
As such, there are only about 10-20 local entities satisfying the five stringent conditions, meaning small gold shops and private firms have to give up trading gold bars as a result.
Duc, the owner of a large gold shop in Ben Thanh Market in HCM City, said he would move his shop to Tan Dinh Market and lease out the present trading venue. He attributed his relocation to the fact that gold trading is no longer profitable like before.
“Since late last year my business has suffered as gold bar selling and foreign currency exchanges were the two main earners. Jewellery trading alone generates little profit,” Duc stated.
Duc used to manage five shops in Binh Tan District with trading volume reaching hundreds of taels per day but now he only has one store left with daily trading volume staying at less than ten taels.
Duc said his business was stuck in a blind alley due to the strictness of State management-related regulations in the context of the present economic woes. This year Duc’s store has shifted to selling jewellery with gold bar sales contributing a mere 10 percent to the total.
Tran Quy Hai, another veteran gold bar trader in Binh Thanh District, said the draft version of the decree had even slowed local demand, thus hitting his business activities.
Regardless of gold price falls, gold bar demands from gold shops have narrowed to one-tenth of levels in previous years, said Nguyen Cong Tuong, deputy head of Saigon Jewellery Company (SJC)’s sales department.
Big companies in the same boat
After the issuance of Decree 24/2012/ND-CP on April 4, Nguyen Quang Huy, head of the central bank’s Foreign Exchange Department, reassured the public there would be no discrimination between accredited SJC gold bars and other legal brands.
Despite such reassurance, local demand for gold bars not bearing SJC brands have sharply tumbled.
Phu Nhuan Jewellery JSC (PNJ) has still sold PNJ-ADB gold bars to buyers but the transactions are set with prices much lower than the selling price of SJC gold bars, said Nguyen Thi Cuc, deputy general director of PNJ.
Trading volumes at PNJ have been very small in recent times, with the majority, at 70 percent, going to SJC gold bars, Cuc noted.
Meanwhile, Sacombank Jewellery Company (SBJ) this year has mainly bought gold bars bearing its brand rather than selling out the gold. Now most consumers are tending to buy SJC gold bars only, according to general director Nguyen Ngoc Que Chi of SBJ.
The same problems are also affecting Agribank Jewellery Co., as cited by chair Nguyen Thanh Truc, who had already submitted a petition to the central bank to seek solutions to save industry insiders.
The company has primarily bought its AAA gold bars because of a weak appetite from local buyers. At certain times it has no choice but to accept a loss of up to VND700,000 a tael to exchange its own gold for SJC in return.