Vietnam should allow companies to import gold for the first time in more than a decade, to close the growing gap between local prices and international benchmarks, an industry official told Reuters.
The Vietnam Gold Traders Association (VGTA) is in extensive talks with the government on measures to correct the imbalance between gold supply and demand, said Huynh Trung Khanh, vice president of the association.
The Vietnamese government virtually took full control of imports and local sales of bullion in 2012, with some large companies allowed to import gold on the condition that they process it into jewelry for export.
“The government said it will start officially importing gold in July or August. We hope that by July it will allow gold companies to import directly,” Khanh said on the sidelines of the conference. on precious metals in the Asia-Pacific region.
The VGTA expects the proposed change to take effect as early as next month. This would be a significant change from current policy, under which the central bank tightly controls imports. The State Bank of Vietnam did not immediately respond to a request for comment.
Attempts to narrow the gap with international benchmarks by holding auctions and allowing four local banks to sell gold in a bid to increase liquidity have had no lasting impact, prices domestic markets still trading at stubbornly high premiums to world prices.
It is essential to immediately reduce premiums on domestic prices, as VGTA estimates that demand for Vietnam’s gold will increase this year. The southeastern country is among the top 10 consumers of gold.
Gold purchases are expected to increase by 10% on an annual basis to reach 33 million metric tons in the first six months of this year, Khanh said during his presentation at the conference.
Retail buyers, who view gold as a wealth preservation tool used to hedge against economic uncertainty, make up the lion’s share of purchases in Southeast Asia’s economy, which numbers about 100 millions of inhabitants.
“The main reasons for this strong demand for retail investment are the sharp fall in savings interest rates, the freezing of real estate and the constant devaluation of the national currency against the US dollar,” said Mr. Khanh.
“We saw people queuing in the streets, in the sun and in the rain, to buy more gold.
The surge in demand for gold has also led to an increase in smuggling, particularly from neighboring Cambodia, Khanh said, adding that it was essential to take immediate policy measures.
“This is a very important underground network. With such an increase in prices, the rate of smuggling remains high.”
The VGTA and the World Gold Council are currently working with Vietnam’s central bank and other government agencies to establish a national gold exchange, a move they say would ensure greater market stability.
(Reporting by Ashitha Shivaprasad and Brijesh Patel in Singapore)
