Vietnam to allow gold imports after decade-long ban

Vietnam is set to allow companies to import gold for the first time in over a decade, aiming to bridge the widening gap between local prices and international benchmarks.

The Vietnam Gold Traders Association (VGTA) has been in lengthy discussions with the government to address the imbalance in gold supply and demand, according to Huynh Trung Khanh, the association’s vice chair.

The government, which has controlled imports and local bullion sales since 2012, is expected to start official gold imports by July or August. This change could take effect as early as next month, marking a significant shift from the current policy where the central bank tightly controls imports. The State Bank of Vietnam has yet to comment on the matter.

Increasing demand, smuggling concerns

VGTA predicts a surge in Vietnam’s gold demand this year, with purchases expected to rise by 10% annually to 33 million metric tons in the first half of the year. Retail buyers, who view gold as a safeguard against economic uncertainty, are the primary consumers of about 100 million people nationwide.

The demand spike is attributed to the sharp decrease in saving interest rates, a stagnant real estate market, and the constant devaluation of the national currency against the U.S. dollar. This surge in demand has led to higher smuggling rates – particularly from neighboring Cambodia.

Khanh emphasized the need for immediate policy action to address this issue, noting the extensive underground smuggling network driven by high domestic prices.

Vietnam plans for national gold exchange

To provide more market stability, the VGTA and the World Gold Council are collaborating with the Vietnamese Central Bank and other government agencies to establish a national gold exchange. Previous attempts to narrow the gap with international prices, including auctions and allowing local banks to sell gold, have largely failed to have a lasting impact.

Domestic prices continue to trade at high premiums compared to global prices. Reducing these premiums is crucial, as VGTA expects Vietnam’s gold demand to continue rising.

The Southeast nation is among the top 10 global consumers of gold, with retail investment demand driven by economic uncertainties and devaluation concerns.