Vietnam tries to end gold mania, boost citizens' confidence in the dong

Vietnam's government is taking measures to strengthen the dong and discourage citizens from hoarding bullion to preserve wealth

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To reduce contraband and wean citizens off gold, Vietnam's central bank has made itself the sole importer of gold. Photo: Bloomberg

Published: 12:00am, 16 Jul 2013Updated: 5:15am, 16 Jul 2013

The target of Vietnam's campaign to stabilise its currency is in the locked wardrobe of retired civil servant Vu Thi Huong: gold bars.

"It's been my habit for ages, buying gold whenever I can save up some money," said Huong, 57, who watches the financial news every day to monitor the price of the precious metal.

"With gold, I can save my fortune and later on have something valuable to pass down to my children and grandchildren."

Huong is among millions of Vietnamese who hold an estimated 300-400 tonnes of bullion to store their wealth. That amount - worth as much as US$19 billion at domestic prices and equal to Britain's official holdings - is a legacy of more than a century of war, revolution and economic turbulence.

The central bank wants to convert the hoard, much of it smuggled in, into dong deposits to strengthen the currency, which has slid 21 per cent against the US dollar in five years.

Inflation and depreciation of the dong in the past have caused people to keep their savings in gold.

Private gold holdings "reflect both the Vietnamese cultural values as well as the lack of confidence in the dong," said Trinh Nguyen, a Hong Kong-based economist at HSBC. "High inflation and depreciation of the dong in the past have caused people to keep their savings in gold."

Demand for bullion prompts importers and smugglers to sell dong for US dollars to buy gold from abroad, depressing the local currency, Michael Kokalari and Hang Vu, analysts at Maybank Kim Eng Securities in Ho Chi Minh City, said this month.

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Vietnam tries to end gold mania, boost citizens' confidence in the dong

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}Vietnam's government is taking measures to strengthen the dong and discourage citizens from hoarding bullion to preserve wealth

Vietnam's government is taking measures to strengthen the dong and discourage citizens from hoarding bullion to preserve wealth