Vietnam Plan Would Allow Gold Imports

From the Wall St Journal:

By VU TRONG KHANH

HANOI—Vietnam's central bank said Thursday that it might allow local companies to import gold in order to stabilize the local gold market, after domestic prices rose to a record this week.

Gold is a popular investment in Vietnam, where a long period of strong consumer-price inflation and several devaluations in the Vietnamese dong have undermined confidence in the local currency.

Allowing gold imports could temper the domestic price of the precious metal, which has risen above global prices. But it could also push up the Southeast Asian country's total import bill, worsening a persistent trade deficit that has hurt the dong.

"Enterprises may be allowed to import gold in appropriate quantities and at appropriate times to stabilize the domestic market," Nguyen Quang Huy, head of foreign-exchange management at the State Bank of Vietnam, said in a statement on the bank's website.

Gold prices in Vietnam have exceeded world prices at times recently, as local investors place big bets on further increases in the global price, Mr. Huy said.

Gold reached a record of 33 million dong ($1,693) per tael Wednesday, about $1,405 a troy ounce. The spot gold price hit $1,349.80 per ounce Wednesday in Asia, a record. In the U.S., the most actively traded gold contract, for December delivery, settled at a record $1,347.70 a troy ounce Wednesday on the Comex division of the New York Mercantile Exchange. Thursday morning it was at $1,347.50 an ounce.

Under the proposed plan, Vietnamese companies wanting to import gold would need to obtain licenses from the government.

"Importing gold in appropriate quantities is the best option for now, though it may have collateral effects," said Le Tham Duong, an economist with the Banking University of Ho Chi Minh City.

He said that by stabilizing local prices, gold imports would help prevent speculation and gold smuggling from foreign countries.

"If speculation happens, it will be very bad for the economy as the capital will rest in gold, instead of being invested in production," he said.

He added that illicit gold imports would lead to outflows of dollars, potentially adding to downward pressure on the dong.

The dong has fallen more than 5% since January as the country's trade deficit has widened, and was trading around 19,498 dong per dollar Thursday.

Vietnam's trade deficit widened to $8.56 billion in the January-September period from $6.8 billion a year earlier, according to official data.

Gold is one of the four major investment options for Vietnamese citizens, besides stocks, real estate and U.S. dollars.