Gold premium seen dropping on central bank sales  A customer examines a gold ring through a pocket microscope at a Phu Nhuan Jewelry Company shop in The premium paid by gold buyers in The gap between domestic and global prices for immediate delivery will probably drop to VND4 million a tael (US$159 an ounce) by the end of July, according to Nguyen Thanh Truc, vice chairman of the Vietnam Gold Traders Association. The premium reached an all-time high of more than VND6 million in April, when bullion tumbled into a bear market, spurring physical demand across Vietnam’s central bank has tightened rules on gold trading, including making itself the sole importer, in a bid to limit the impact of gold prices on the exchange rate and redirect financial resources toward economic development. As part of the drive, banks must return all gold deposits to investors by June 30, while the State Bank of “Demand for gold in ‘Favorite tool’ “The stricter regulatory measures implemented by the State Bank of Vietnam and the fear of a steep decline in gold’s price may affect gold demand temporarily,” Albert Cheng, Far East managing director at the council, said in an e-mail. “In the long run, for the majority of Vietnamese, particularly those who have lived through the war years and the ensuing economic regression, gold is still considered as the favorite tool for saving and investment.” Economic stress “In periods of economic stress, expectations for dong weakening caused people to buy dollars and gold,” Matt Hildebrandt, a Singapore-based economist at JPMorgan Chase & Co., said in a phone interview on June 10. “The central bank is trying to reduce the use of gold to create more stability for the dong.” The Vietnamese currency weakened 24 percent against the dollar in the four years through 2011. Bullion slumped 18 percent in In The central bank has held sales since the end of March to help banks return deposits by June 30. So far 709,800 taels, or about 27 tons, have been sold in 28 auctions through June 7, according to the bank. Bloomberg |
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