Vietnam Tightens Regulations on Gold Trading

Fresh gold trading clampdown aims to target the Dong-Dollar exchange rate...

 

VIETNAM's central bank has instilled new rules to try to limit the impact of gold trading on the foreign exchange rate of its currency, the Dong.

 

The authorities say they also want to steer local investment towards the domestic economy. One policy is to make the central bank itself the sole importer of gold into Vietnam – the second largest gold buying nation in Southeast Asia.

 

According to a February report from the World Gold Council, last year Vietnam consumed 77 metric tonnes of gold versus 80.9 tonnes in Thailand.

 

"Previously," said the State Bank of Vietnam in a statement, "each year the amount of gold imported into Vietnam was about 100 tons, which would require a foreign- currency amount of about $4.4 billion

 

"That had very strong impact on the increase in the Dong-Dollar exchange rate, causing macroeconomic instability."

 

Hanoi's communist government has been struggling to contain Vietnam's private gold demand for several years. Last October commercial banks were ordered by the State Bank to stop taking gold deposits. That restriction on gold trading takes effect on June 30th, and auctions have been held to find some 20 tonnes of gold needed to return to depositors by the end of this month.

 

Frantic gold trading during the sharp global price drop this spring has seen Vietnamese prices rise sharply above international levels.

 

With the new restriction, "the gap between domestic and global prices for immediate delivery will probably drop to 4 million Dong a tael [some $160 per ounce] by the end of July," reckons Nguyen Thanh Truc, vice chairman of trading company Vietnam Gold.

 

"But the gap will probably not fall as much as we hope."

 

"Gold," says Albert Cheng, Far East managing director at the World Gold Council, "is still considered as the favourite tool for saving and investment."