Advertisement
Vietnam
AsiaSoutheast Asia

As gold smuggling runs rampant, Vietnam casts around for ways to tame market

  • The rise in gold smuggling is being fuelled by a combination of a lack of official supplies and flight-to-safety demands amid a struggling economy
  • Economists say demand for dollars to pay for gold imports has pressured the dong to drop, making it hard for the central bank to curb inflation

Reading Time:3 minutes
Why you can trust SCMP
0
Gold bars and coins. Vietnam’s gold imports were about 55.5 tonnes last year, compared with 39.8 tonnes in 2020. Photo: dpa
Bloomberg

Stabilising the gold market is a pressing issue for the Vietnamese government with smugglers taking advantage of higher local prices to slip in the precious metal, leading to exchange rate distortions and weakness in the dong that’s hurting the economy.

Prime Minister Pham Minh Chinh and members of the National Financial and Monetary Policy Advisory Council are among top authorities who have been urging for solutions in recent months. The price gap of the metal locally over the international rate must be narrowed “to avoid adverse developments”, Chinh said last week as he ordered the central bank to step up measures to calm the market.

Vietnam’s gold imports were about 55.5 tonnes last year, compared with 39.8 tonnes in 2020, according to the data from the World Gold Council. People familiar with the domestic gold market and its regulations said the increase is predominantly via illegal channels as Vietnam has strict rules on the metal’s imports. They asked not to be identified because of the sensitivity of the matter.

The rise in gold smuggling is fuelled by a combination of a lack of official supplies and flight-to-safety demands amid a struggling economy. This influx exerts pressure on the dong as smugglers need to buy dollars in the so-called black market to pay for the commodity.

The dong closed at 24,962 on Friday in Hanoi, near a record low against the dollar, according to a compilation of daily fixings from banks. It has weakened 2.9 per cent this year.

Demand for dollars to pay for the gold imports “has pressured the dong to drop further, making it hard for the central bank to curb inflation and negatively impacts the economy,” according to economist Nguyen Tri Hieu, general director at Toan Cau, a research institute for finance and real estate.

A store attendant poses with an ox-themed limited edition gold-plated mobile phone. Gold has been setting a series of records over the past couple of weeks. Photo: AFP
A store attendant poses with an ox-themed limited edition gold-plated mobile phone. Gold has been setting a series of records over the past couple of weeks. Photo: AFP
Gold has been setting a series of records over the past couple of weeks, touching its latest all-time high of US$2,330.50 an ounce on Friday. Persistent tensions in the Middle East and Russia’s war in Ukraine have bolstered the metal’s role as a haven asset.
Advertisement