Vietnam will not pass gold prohibition legislation

In spite of market rumours, the Vietnamese government is not crafting gold prohibition legislation.

This statement comes from a high-ranking member of the country’s central bank in an interview that was published on the State Bank of Vietnam´s website at the weekend. As a result of the central bank recently devaluing the national currency, the dong, against other international currencies for the fourth consecutive time, inflation in Vietnam is getting out of control. The government does, however, plan to tighten national gold trading regulations as a means of exerting control on the black market.

Nguyen Quang Huy, head of the Foreign Exchange Market Division at the State Bank of Vietnam, said in an interview published on the central bank´s website on Saturday that Vietnamese citizens would retain the right to own gold. There had been rumours that Vietnam´s government planned to prohibit the private ownership of gold among the country´s population. Vietnamese policy makers have recently requested that the central bank take measures to gradually eliminate the country´s illegal gold trading activities as soon as possible. Huy also rejected the idea that the government was considering prohibiting local investors and savers from investing in foreign currencies.

Since 2009, the flight to real assets like gold has accelerated among Vietnam´s citizens. The structural problems of the country are enormous. In spite of the central bank´s fourth devaluation of the dong, the nation’s gigantic trade deficit is climbing ever-higher. Monetary policy makers hoped to boost the economy by devaluating their currency, but this measure has so far been unsuccessful, as rising commodity prices have led to a big rise in import prices. Energy prices have turned out to be the main drivers of inflation. In February the inflation rate climbed to a two-year high of 12.31 per cent.

In the course of the past decade the Vietnamese have devaluated the dong by 24 per cent against the US dollar. This has led to reduced foreign investment in the country. On February 11, the State Bank of Vietnam announced another devaluation of the dong – by 8.5 percent, setting the dong at 20,693 to the US dollar. In the meantime, the dollar was already trading at 21,550 dong on the Vietnamese black market, pointing to rapidly falling confidence in the nation’s currency. This is the main reason why more and more Vietnamese citizens are investing their money in real assets like gold.

Recently Vietnam passed a law that prohibits trading gold bars on the black market. The government would not issue any licenses in regard to gold trading activities as well as its production in the near future, the central bank disclosed.- GoldMoney

Tags: vietnam gold, Vietnam gold market, Vietnam gold prices