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Vietnam gold market status and solutions - 2

gold is the most known and it can also shine. In fact, 1 gram of gold can be pounded into a 1m2 sheet, or 1 ounce into 300 feet2. Being a soft metal, gold is often combined with other metals to make it harder. Gold has good thermal and electrical conductivity, and is not affected by air. Because of this characteristic, gold is used as a circuit wire in semiconductors, or the “brain” of computers. Gold is also used as a binder for printing circuits on ceramic substrates, producing printed circuit boards. Gold forms alloys with many other metals; alloys with copper give a redder color, alloys with iron give a greener color, alloys with aluminum give a purple color, with platinum gives a white color, and natural bismuth with silver alloys gives a black color. Therefore, gold is used to make jewelry and can be combined with many metals to create beautiful gold colors [23].

1.1.3. Aesthetics

Gold is a highly aesthetic metal. The color of solid gold as well as of colloidal solutions of gold (dark, usually purple) is created by the plasmon frequency of this element in the visible range, producing yellow and red light when reflected and blue light when absorbed. Gold forms alloys with many other metals, alloys with copper give a redder color, alloys with iron give green, alloys with aluminum give purple, with platinum give white, natural bismuth with silver alloy gives black. With the above aesthetic properties, gold is most suitable for making jewelry. Gold jewelry becomes more diverse when combined with other metals. And making jewelry also increases the aesthetic value of gold.

1.2. Applications of gold

With the above properties of gold, gold is applied in life for many different purposes.

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1.2.1. Making jewelry

Gold is one of the most popular metals for jewelry production. Gold jewelry often includes: rings, necklaces, bracelets, bangles, earrings, brooches... gold is even used to decorate items such as vases, lighters, fountain pens... Gold jewelry is made according to the following standards: 9, 14, 18 and 24 carats. 18 carat gold means 18 parts pure gold in 24 parts gold, equivalent to 75% pure gold. 24 carat gold is too soft so it is difficult to create jewelry or use to mint money. Therefore, gold in jewelry is gold that has been combined with other metals such as silver, copper, etc. not only to create hardness but also to create different colors, creating many rich and diverse designs. Copper is a metal that is often combined with gold to create a redder color. 18k gold mixed with 25% copper is often used for antiques or jewelry, and can also be used to make red gold flowers. 14k gold has a red copper color and is used for badges such as police and military badges. Green gold is made by mixing gold with iron, and purple gold is gold mixed with aluminum. These types of gold are used for jewelry or decoration.

1.2.2. Is an essential metal

With the above mentioned chemical and physical properties of gold, gold is considered an essential industrial metal and began to emerge in the late 20th century. With high thermal conductivity and oxidation resistance, gold is used to plate the surface of electrical connectors, ensuring good contact and low impedance.

In addition, gold can be made into thin threads to make embroidery thread, creating rare gold embroidery paintings.

Furthermore, gold is also used to perform important functions in computers, communication equipment, jet engines, spacecraft and many other products.

Gold is used in restorative dentistry, especially in dental restorations such as crowns and bridges.

Colloidal gold is a highly colored solution that is being studied in many biomedical laboratories. It is also used as a gold paint on ceramics before firing.

Each year about 10% of gold production is used for industrial processes.

1.2.3. Is the only common world currency

Gold is a currency that is naturally recognized by countries as a means of international payment and an international means of storage without having to be recognized in any signed agreement between countries in the world. Currently, besides gold, there is no currency that can replace gold in the function of world currency.

When gold is a world currency it has the following characteristics:

-For many years, gold has become the reserve currency of countries in international payments.

-Gold is not used for daily payments of transactions between countries.

- Do not use gold to express prices or calculate the total value of agreements or contracts.

-Paper money is not freely convertible into gold through the gold content of the currency.

-Gold is only used by countries to pay each other when other means of payment cannot be found.

1.3. Units of measurement and conversion of Gold

In the jewelry industry in Vietnam, the unit of measurement is calculated in taels (quantities or taels) or smaller in chi. A tael of gold weighs 37.50 grams. A chi is 1/10 of a tael of gold. In the world, gold is usually calculated in ounces or troy ounces. 1 ounce is equivalent to 31.103476 grams.

Gold purity is measured on the K (karat) scale. One Karat is equivalent to 1/24 of pure gold. 9999 gold is equivalent to 24K. When people say gold purity is 18K, it means that the gold content is approximately 75%. Gold used for jewelry is also known as western gold and is approximately 18K.

- World gold market

*Price unit: USD/ounce

*1 ounce = 1 troy ounce = 0.83 tael

*1 tael = 1.20556 ounce

- Domestic gold market

*Price unit: VND/tael

*Formula to convert world gold price (TG) to domestic gold price (TN)

TN = (TG + shipping fee)* 120556*(1+import tax)*USD/VND exchange rate+ processing fee

2. THE ROLE OF GOLD IN THE ECONOMY

Over thousands of years of history, the role and monetary function of gold has not faded, gold even has more and more applications and plays an increasingly important role.

more important role in human economic life, in which the most important role of gold is monetary function.

2.1. Gold as a currency

The most important and common role of gold is associated with the monetary function. Gold is used as a reserve in central banks. As of 2004, central banks around the world and official financial institutions held about 19% of the total gold reserves on land for storage purposes. Up to now, the United States is the country with the largest gold reserves in the world, reaching about 8,133.5 tons, followed by Germany, Italy, Japan, China... but in terms of region, Europe is the region with the largest gold reserves in the world.

With the monetary function, gold is not only used for storage by central banks, gold is also used as a traditional and popular savings asset in many countries, especially in East Asia. Gold is used as savings in the form of jewelry such as necklaces, rings, bracelets, or gold bars (trees). According to some statistical documents, gold is a very popular jewelry in India, while in Vietnam, people buy gold with the mentality of saving and consider it a safe measure to ensure the value of money or as a dowry for their children.

In addition, as a world currency, gold has all the basic elements to perform its monetary function: it is recognized by the whole world as currency, gold is the most recognizable in circulation due to its color characteristics, it is easily divisible so that different denominations can be exchanged between sellers and buyers, it is durable so that it can be used for a long time, gold is easy to move, and in addition, gold is scarce so it has value. Gold meets all of the above requirements and it can be said that it is the only form of matter in the world that meets it. The amount of gold that people

The amount of gold obtained has not changed dramatically over the centuries; the amount of additional gold mined is quite small and predictable.

In addition to its role in storing and saving, gold also plays a huge role in industrial production for equipment manufacturing, weapons manufacturing, and watch manufacturing.

2.2. The role of gold in monetary regimes

2.2.1. Isotopic regime

In the feudal system, silver was the main monetary metal. In the early stages of capitalism, the State stipulated that silver be used as a monetary metal. As the production and circulation of goods developed, especially transactions with large volumes of valuable goods increased, the use of silver as a common equivalent was no longer appropriate. Because the value of silver was very small, people had to find another metal with a higher value than silver to put into circulation. That metal could only be gold . [1]

Therefore, gold and silver are always metals that are especially favored over other metals, because their characteristics have met most of what a commodity currency needs: scarcity, durability, transportability, divisibility, and long-lasting quality.

The acceptance of gold and silver as money was further strengthened by the fact that these metals were widely recognized as having non-monetary uses in industry and jewelry. Furthermore, the value of gold and silver was relatively stable compared to other commodities, and their quality could be accurately tested and certified by experts known as goldsmiths.[8]

The currency standard is the first monetary system recognized in human history. The currency standard is a monetary system in which the State law stipulates that two metals, gold and silver, are simultaneously used as monetary metals, and that gold and silver coins are freely minted and have unlimited legal effect for payment.

Based on the regulations on the exchange relationship between gold and silver coins, the currency standard is divided into two specific types: Parallel standard and dual standard.

The dual standard is a system of two standards in which the exchange rate between gold and silver coins in circulation is determined by the actual value of the gold and silver contained in the two coins. In this standard, metal goods operate on the basis of the full value of coins, that is, their monetary value is also the metal value of the coins. Therefore, when the price of gold changes compared to silver, the exchange rate between gold and silver coins will change accordingly. Although coins are minted with each country's own mark as proof of the content and quality of the metal, in practice countries often mint coins with a mixture of gold or silver or other metals of lesser value. Countries increasingly reduce the proportion of gold and silver in their coins, which leads to the coins gradually losing their circulation value, so this action is similar to modern devaluation.

Unlike the parallel standard, the dual standard is a two-currency system in which the exchange rate between gold and silver coins is specifically regulated. For example, in the United States in 1792, this exchange rate was set at 1/15. Usually, people call the dual standard system mainly just this dual standard system.

The silver standard lasted until 1834, when the US Congress decided to raise the price of gold from $19.394/ounce to $20.76/ounce, while silver remained the same, to restore the metal standard. This brought the ratio of silver to gold to 16, while the world was still at 15.5. Once again, in reality, the US was on a gold standard.

In 1879, the US decided to convert the USD back to gold instead of silver, this was an important step in forming the monetary system.

gold standard (gold standard) in the United States. However, this regime was not officially ratified until the Gold Standard Act of 1990.[8]

The currency standard is an unstable monetary system because the nature of money is to monopolize and exclude others. The legal recognition of both silver and gold as monetary metals is contrary to that nature of money.

In the dual standard system, because the circulation of gold and silver coins is based on the actual value of the monetary metal contained in it, the prices of goods and services in the market are of course expressed in two types of prices: prices in gold coins and prices in silver coins. These two types will of course change according to the spontaneous changes in the exchange rate between gold and silver coins in the market, so the prices of goods and services will be chaotic and lead to market chaos.

In the dual standard regime, the State regulates a fixed exchange rate between gold and silver to overcome the instability of commodity circulation caused by the parallel standard regime, but it also causes bad money to push good money out of circulation, which causes serious chaos in the monetary regime.

When two types of money have unequal real values, and their nominal values ​​are set by the state separately from their real values, and they circulate according to that nominal value, the money with higher real value will of course gradually be withdrawn from circulation, while the money with lower real value will be put into circulation due to flooding the market. This phenomenon is called Gresham's law.

Under the effect of this law, in reality, in the dual-currency standard regime, there was only one low-value currency in circulation. This was the premise for the birth of the mono-currency standard regime later.[1]

2.2.2. Gold standard

The gold standard is a system in which currency is freely minted in gold, and secondary money and credit money, and bank money are convertible into gold.

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