Running rings around gold bar rules

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A gold ring in plastic packaging at a shop in Ho Chi Minh City

Things are getting more complicated in Vietnam's gold market as producers and sellers try to push for a new bar/ring hybrid as the deadline for tightened rules on bullion trading approaches.

As a jewelry item, gold rings have been very popular in Vietnam, and for savings purposes, people usually choose to go with gold bars.

But with many gold traders unable to meet new requirements for selling gold bars, industry insiders say switching to gold rings that are placed in plastic packaging the norm for all gold bars is a solution to avoid being forced out of the business.

Starting February 10, gold bar traders are required to show a registered capital of at least VND100 billion (US$4.8 million), a minimum tax payment of VND500 million, and a presence in at least three provinces or major cities.

And as the central bank has taken over gold bar production and appointed Saigon Jewelry Company the only official supplier, other producers have stopped casting bullion. They are still, however, making rings that are properly sealed and thus can be easily traded like gold bars.

Nguyen Van Dung, chairman of the Ho Chi Minh City Jewelry Association, does not like accusations that businesses are dodging the law.

This is simply entrepreneurs refusing to go out without a fight, he says.

Businesses have to try to do everything they can to survive, and considering recent developments in the market, it is a good strategy to push for gold jewelry in general, rings in particular, he said.

Tran Hai, a jewelry maker in the city, said rings are easy to make.

They are already favored by local consumers as a jewelry product, but rings with plastic packaging can be conveniently stored as possessions too, he said.

Tran Nhu My, sales manager at Doji Gold and Gems Group, said her company is not trying to bypass regulations in producing packaged gold rings.

The company has made the product for years, but sales were not strong before, she said.  

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An industry insider who asked not to be named said no matter what businesses say, this is a case of making use of legal loopholes.

It is just strange to see a gold ring weighing nearly 20 grams, or half the popular weight for gold bars, categorized as jewelry, he said.

But this is a consequence of tightened polices, he said, adding that the market could even expect to see packaged bracelets and necklaces that are too heavy to wear as jewelry.

Despite the increasingly popular trend, industry insiders do not see rings completely replacing gold bars anytime soon.

Prices of rings are still 4 percent lower than bars with the same gold content. However, they are higher than international gold prices, and the gap has been expanding fast over the past month.

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