Stashing gold at home rather than having cash in the bank is a generations-old habit in Vietnam, but a recent surge in price has sparked government attempts to bring gold hoarding 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.
Old habits are dying hard 60-year-old retiree Truong Van Hue said, even if an ounce of gold bullion can now cost up to US$100 more in Hanoi 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 any time, anywhere, when I need cash,” he said.
Although gold has long been considered a safe haven, the recent gold rush has alarmed Vietnam’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 formally legalizing the already common practice of private gold ownership and trading.
A series of financial measures initiated last summer included a decree that placed the gold bullion business of Saigon Jewelry Co, the dominant processor and trader, under the control of the State Bank of Vietnam.
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.
“They want to control the gold,” said a manager at Phu Quy Jewelry Co, whose digital signs feature the bid and ask prices for the local tael — 37.5g of gold bullion.
“I really cannot say if it is a good or bad idea, but here in Vietnam 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 falls well short of last year’s 18.6 percent rise in the cost of living.
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 devalued again later this year.
“People have tried to control the damage by fleeing into gold,” former senior government economist Le Dang Doanh said.
Vietnam’s love of the yellow metal is centuries-old, rooted in a history of strife, warfare and want.
“Empires may fall, currencies may change ... gold will always survive,” sociologist Vu Duc Vuong said.
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 have not yet been made public, but bankers say the government is considering ways to lure savers by offering better returns and security.
The government estimates that between 300 tonnes and 500 tonnes 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.