Vietnam eyes ban on unofficial gold bullion trade

HANOI, VIETNAM - Vietnam is planning to ban unofficial trade in gold bars in a fresh bid to strengthen its struggling currency, state media reported Monday.

The central bank is preparing a draft decree that would prevent gold shops from trading bullion, Vietnam News Agency (VNA) said, citing an unnamed central bank official.

Gold jewellery could still be bought and sold under the draft, which will be presented to the government by the second quarter of this year, it said.

The central bank would designate official outlets where people could sell their gold bars, while buying bullion would become harder.

Many Vietnamese hold dollars and gold - rather than their own currency - as a safe haven against economic uncertainty.

Their lack of confidence in the dong, reflected in their personal stockpiles of alternative assets, underlies the unit's weakness, economists have said.

In January 2010 the government ordered the closure of public gold-trading floors operated by banks and other firms because of fears they were being used for high-risk deals.

Authorities this month devalued the dong for the fourth time since late 2009.

VNA reported that the Vietnamese public holds several hundred tonnes of gold.

Tightening gold-bar trading would help to change people's habits and mobilise large amounts of idle funds, VNA said, citing the State Bank of Vietnam, the central bank.

The World Bank has said Vietnam was the world's biggest importer of gold in 2008, when the country's annual inflation reached 23 per cent.

After levelling off, inflation has accelerated every month since August 2010, hitting 12.17 per cent year-on-year in January, far higher than Vietnam's neighbours.

The proposed restrictions on gold trading are the latest in a series of measures unveiled by authorities to stabilise the economy which is facing a complicated mix of challenges. These include a trade deficit that reached an estimated US$12.4 billion (S$15.8 billion) last year.

Last week the government announced that state-owned groups - a key part of the economy - must sell foreign exchange, a move which an economist said should boost dwindling foreign reserves at the State Bank, helping to control the exchange rate and in turn act as a break on inflation.