HANOI: Vietnam has chosen a novel method to contain trade deficit that has tripled this year—temporarily ban gold imports.
Vietnam, the second largest gold investor in the world has already imported 60 tonnes of gold valued at US$ 1.8 bn, a 100 percent increase over the same period last year. The price of gold was quoted by local dealers at around $US873 an ounce, lower than international prices
The suspension of gold imports is not likely to raise domestic prices because of plentiful supplies and weak demand. This is as part of the country’s effort to rein in inflation.
But traders added only a prolonged suspension could cut domestic supplies and trigger a scramble for safe-haven assets. Fears that the dong could fall in value are making dollar holders reluctant to let go of their foreign exchange.
Traditionally, Vietnamese use gold for savings, jewellery and real estate transactions but when inflation is high many choose gold or the U.S. dollar to hedge against inflation.
The central bank have given quotas to 40 banks and trading houses to import 73 tonnes of gold in 2008, up slightly from about 70 tonnes in 2007.
Vietnam imported 77.7 tonnes of gold for jewellery and investments in 2007. On the other hand main gold consumer India imported more than 700 tonnes last year. Analysts,however, don't expect the Vietnamese decision to have any significant impact on gold markets.
Following a year of overheating and high credit growth, 2008 has been strained for Vietnam, where macroeconomic stability was taken for granted as it boasted one of the world's highest growth rates, averaging 7.5% a year since 2000.