Vietnam central bank sticks to ‘goldization’ fight, will consider open gold exchange

Vietnam’s central bank, the State Bank of Vietnam (SBV), will continue to discourage the use of gold as investment or an asset to speculate on, says Governor Nguyen Thi Hong.

Upcoming policies will be designed to make gold unattractive for such purposes, Hong said Monday at a Q&A session of the National Assembly.

Where there’s demand for using gold as a traditional asset, the SBV will ensure supply of the precious metal in the market “in a reasonable manner,” she added.

“Goldization” refers to the tendency of people to hoard and use gold as a type of currency, driven by concerns over devaluation of the Vietnamese dong.

The SBV stepped in to intervene in the gold market in April to narrow the premiums between domestic and global markets as high demand in Vietnam prompted gold smuggling.

The bank injected over 13 tons of SJC-branded gold bars via nine auctions and 44 sales events to the market via four state-controlled banks, helping reduce the price gap to VND3-4 million ($118.46-157.95) from VND18-20 million.

However, Hong noted that gold prices remained unstable due to global geopolitical developments as well as other variables such as interest rates, forex rates and oil prices in the global market.

“The SBV will closely watch market developments and make interventions when necessary,” Hong said.

She added that the SBV and other government agencies will review Decree 24/2012/ND-CP on gold market management and advise the government on measures to deal with the current situation.

As part of its policy to fight goldization and dollarization, the SBV does not encourage residents to hold gold, particularly gold bars, given their high value. When gold is hoarded, an equivalent amount of cash stays idle. Meanwhile, that amount of asset should be turned into Vietnamese dong and be used for business or investment in other channels such as securities, Hong said.

“Therefore, the State holds a monopoly in gold bar production and import, and controls closely gold trading,” she explained.

Asked about establishing a gold exchange, Hong responded that such an exchange will help increase transparency in the gold market and facilitate trade by residents and institutions. This would require investment in infrastructure, but Vietnam is not a gold-producing country.

The SBV will work with other agencies and thoroughly assess the impact of a gold exchange and advise the government accordingly, she added.