Vietnam’s Banking System Has Been Short on Gold

I pointed out earlier how Vietnam’s banking system enticed the public by paying dividends on gold holdings lodged or deposited with them. This seems to be a ruse.

Yet like any typical paper money based banking system, bankers distrust gold and exploit them. The public’s gold stored at the banks have essentially been “shorted” by Vietnam’s banking system supposedly to boost liquidity.

Notes the Zero Hedge, (bold original) 

any time a bank, and especially an entire banking sector, is willing to pay you paper "dividends" for your gold, run, because all this kind of (s)quid pro quo usually ends up as a confiscation ploy. Sure enough, as Dow Jones reports today, the gold, which did not belong to the banks and was merely being warehoused there (or so the fine print said), was promptly sold by these same institutions to generate cash proceeds and to boost liquidity reserves using other people's gold, obtained under false pretenses. 

And now, it is time for the forced sellers to become forced buyers, as "the State Bank of Vietnam, the country's central bank, may allow local banks to buy up to 20 metric tons of gold over the next two months to improve their liquidity ahead of a ban soon on their use of gold as a means of boosting their operating capital." What they mean is that having been caught engaging in an illegal reserve boosting operating, the banks are now "allowed" to undo their transgressions ahead of a "ban" on what inherently was not a permitted practice. What is left unsaid, of course, is that any gold anywhere in the world, that is not in one's physical possession, and has been handed over to an insolvent bank (virtually all of them) for "safekeeping", is currently being sold, lent out, rehypothecated and otherwise traded with, in a way that any demand for full delivery will generally be met with silence, blank stares and phone calls going straight to voicemail.

The growing clamor for ‘audits’ on gold reserves and the "discovery" or revelation of Vietnam’s banking system gold “shorts” should provide gold prices the necessary support.

Yet this gives further motivation for the average Vietnamese to stockpile their gold holdings at home.