USD "fever" due to gold?

- According to experts, the USD continued to increase heat in recent weeks due to bank exchange needs to finalize gold status. There arises the question bank is really "soft" dollar amount or just the "virtual" created by gold speculators.

As announced by the State Bank of Vietnam (SBV), calculated from the date of 28/3 to the time of day 14/6, over 31 gold auction, the central bank has provided for a total of 787 300 members of gold (equivalent more than 29.7 tons of gold).


At auction the last 31 minutes, there were 11 credit institutions (banks) and now winning total of 25,700. In this session, bid prices ranged from 40.37 to 40.44 million / tael.


How many dollars for gold?


In late 2012, the central bank statistics show that banks still lack about 20 tonnes of gold to settle contracts. And to buy some gold, would cost about 25,000 billion (about $ 1.2 billion if the exchange rate is 20.820 interbank VND / USD). At the insistence of gold liquidity shortage, the central bank had to "remove" the bank backed by the state deadline to finalize on 06/30/2013. Thus, only about 2 weeks for the gold trade credit, offset negative liquidity status.


Movements from the past 31 auctions showed the level of "soft" gold of the fact that very large banks. By day 14/6, the amount of gold that the bank bought more than 29.7 tons, is expected to exceed 9.7 tons, increased by 48.5% and the cost to buy more expensive gold respectively. It is expected that the central bank will also auction organized "pumping" the gold market.


According to Dr. Nguyen Tri Hieu, banker, to settle the race to recover the gold position is critical, therefore, banks must find ways to buy enough gold missing. In addition, the bank may buy more gold to enlist to "surf" the price of gold as well.


The question is, with such strong demand, sources of national gold reserves are not good enough to meet the central bank will have to import more gold? If imports of gold, how much bank exchange?


                                                                                   

 

                                             Foreign exchange inflows to banks as expected


In this regard, Ts. Hieu said that due to limited national reserve central bank should be able to use a large amount of foreign currency to import gold, meet the needs of the domestic market. However, the central bank did not announce specific injection of gold through bidding, how much of that from the national reserves and from imports.


"Obviously, the import of gold is not less., But not more than $ 1.5 billion (estimated) cost of imported gold is bought as central bank gold reserves are available. Therefore, if the use of major foreign currencies for import of gold, it will cause a temporary pressure on the VND / USD. later on 30/6, you pay gold status, this pressure will decrease, "Ts. Hieu said.


The pressure from speculators


The past few weeks, the foreign exchange market "hot" when banks simultaneously pushing the purchase price - higher sales dollars. Prices listed banks have up to 21030-21035 VND / USD (buy) and reached a ceiling 21,036 VND / USD (sold out).


However, the U.S. market freedom was "fever" is higher when the gold shop, foreign currency transaction "illegal" increase day by day. Here, the USD is trading buy - sell at around 21.250 VND / USD, which is higher than the list price of the bank to 214 per dollar.


With the big difference, the free market is a strong positive cash flow USD smoking, tough competition with banks. This competition will cause foreign exchange inflows to banks slowed down, not as expected.


In fact, the foreign exchange market "fever", will create conditions for speculators to profit by pushing the dollar higher, destabilizing markets. In particular, the speculators have the ability to collect huge amount of foreign currency, will be hoarding their dollars, pushing prices higher, pressuring central bank devalued the dong. Then speculators sold dollars at a higher price to make a profit.


However, "I do not see too big speculation at this time, although there is always speculation in the forex market a difficult to control such as Vietnam. Traded interbank rates fixed at 20,828 / USD (amplitude + / -1%) as a measure to protect the exchange rate policy of the central bank. Notwithstanding the pressure on the exchange rate, but I do not agree with devaluation. because in this situation, VND devaluation will be very dangerous, destabilizing markets. however, when commercial banks have a legitimate need for foreign currency, central bank pumped money to support "Ts.Tri Hieu said.


When the pressure of foreign currency pushed up high, facing the central bank will have 2 options: keep reserves in liquid state and injected money to support the foreign exchange market. Selecting the plan will be required to weigh the decision carefully, especially when the amount of foreign exchange reserves of Vietnam is only equivalent to about 13 weeks of imports, still a modest figure.