Stashing gold at home rather than
having cash in the bank is a generations-old habit in Viet Nam, but a recent surge in prices has sparked government
attempts to bring the yellow metal to heel.
Last year the country bought more
gold per capita than India or China, according to the World Gold Council, and
domestic prices soared by 18 percent — far outstripping the global market’s 11
percent increase.
And old habits are dying hard,
according to 60-year-old retiree Truong Van Hue, even if an ounce of gold
bullion can now cost up to $100 more in Ha Noi than anywhere else in the world.
“I still like to keep my
savings in gold. It’s safe for retired people like me. I can sell the gold
anytime, anywhere, when I need cash,” he told AFP.
Although the resource long has been
perceived as a safe haven, the recent gold rush has alarmed Viet Nam’s
government, which is faced with an 18 percent inflation rate and an unstable
national currency, the dong.
Officials are trying to dampen the
gold fever by bringing the trade back into their hands, almost two decades
after they formally legalized the already-common practice of private gold
ownership and trading.
An alchemy of financial measures
initiated last summer include a decree that placed the gold bullion business of
Sai Gon Jewelry Co., a dominant processor and trader, under the control of the
central bank.
Limiting widespread street-level
trading of gold will, the official line goes, reduce price volatility and
prevent retail investors from pouring into the precious metal, which undermines
the already-shaky dong.
To this end, officials are also
considering a second measure which could force more than 10,000 jewelry shops
to get out of the bullion business and focus strictly on jewelry instead.
“They want to control the
gold,” said a manager at Phu Quy Jewelry Co., whose digital signs feature
the bid and ask prices for local “taels” — 37.5 grams of gold
bullion.
“I really can’t say if it’s a
good or bad idea. But here in Viet Nam we need (economic) stability,” he
said, on condition of anonymity.
For practical reasons, many
Vietnamese prefer to keep their savings in gold, saying the 14 percent maximum
interest rates offered by banks for dong deposits fall well short of last
year’s 18.6 percent cost-of-living rise.
Recent slumps in the real estate and
stock markets have further heightened the gold rush, economists say, as have
signals from the central bank that the dong could be due for another
devaluation later this year.
“People have tried to control
the damage by fleeing into gold,” said Le Dang Doanh, a former senior
government economist.
Restricting the gold trade dovetails
with an ongoing national campaign to encourage Vietnamese to bank their gold,
reversing the practice of keeping it at home.
Details of the plan are not yet
public, but bankers say the government is considering ways to lure savers by offering
better returns and security.
The government estimates that
between 300 and 500 tons of gold are privately held by Vietnamese citizens
outside of the banking system, the central bank governor said last month.
Placing this private gold in banks,
officials explain, would provide authorities with more leverage to stabilize
the economy.
“If the profit is a little
higher and the banks prove their credibility, I expect 80 percent of the public
will deposit their gold,” Nguyen Thanh Truc, CEO of the Agribank Jewelry
Co. said.
The moves to rein in the gold trade
come after a dramatic improvement of living standards since Viet Nam started a
shift to “market-oriented socialism.”
Two decades of economic growth
lifted the country to middle income status in early 2011, as measured by the
World Bank. But progress is threatened by macro-economic issues including
persistently high inflation and corruption.
People on Ha Noi’s Ha Trung Street,
a hub of the busy gold trade, are skeptical of the government’s efforts.
“They will make it a bit
harder, but I believe there will always be ways to trade the bars,” said
Tran Hoang Long, a 40-year-old gold trader.