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Gold Shortage to Hit Vietnam

Gold imports to Vietnam are being squashed despite strong Gold Investment demand...

allowing unlimited Gold Bullion imports, Vietnam is likely to face supply shortages soon, reports Commodity Online in Mumbai, India.

According to Vietnam Gold Business Association there will soon be a shortage in gold supplies for production in Vietnam, because it in fact exported around 36 tonnes of the precious metal in the first six months of this year.

In a statement, the Association said Hanoi's central bank meant to resume gold imports, but a recent trade deficit figure of nearly $7 billion may have made the bank hesitant.

The current price gap between local and international Gold Prices was because local demand exceeded supply, it said.

Vietnam's trade deficit widened to $6.73 billion in the first half from $2.26 billion in the same period a year earlier, according to the General Statistics Office. However, analysts said the local Gold Price premium-to-international prices is also driven by psychological factors, not merely by demand and supply mechanics.

The Vietnamese central bank earlier this month decided to lift restrictions on Gold Bullion and jewelry imports, allowing local traders to import unlimited volumes of gold in an attempt to bring local prices down.

On Saturday, local dealers report, the gap between local and international Gold Prices narrowed to around VND200,000 per tael, compared to VND700,000 a week ago. A tael weighs approximately 1.2 troy ounces (38 grams).

In Vietnam, gold can only be imported when the State Bank of Vietnam grants the appropriate licenses. However, the central bank always tries to restrict gold imports, which explains why illegal imports have become so prevalent in this gold-hungry nation with little-to-zero domestic Gold Mining output.

Every time the domestic Gold Price is higher than the world price, Dollar traders try to store up Dollars and raise the Dollar price, because they know that Vietnamese gold traders will have to collect Dollars to import gold illegally. Therefore, it was not by chance that the State Bank last week announced that it will allow importation of gold with no limit on volume.

However, the State Bank likely does not want gold to be imported, because this will only exacerbate the already serious trade gap, and put hard pressure on the Dong currency against the US Dollar. This may be the reason why the State Bank has been slow in granting licenses.

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