Stashing gold at home rather than having cash in the bank is a generations-old habit in communist Vietnam, but a recent surge in prices has sparked government attempts to bring the yellow metal 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.
And old habits are dying hard, according to 60-year-old retiree Truong Van Hue, even if an ounce of gold bullion can now cost up to $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 the treasure has long been perceived as 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 they formally legalised the already-common practice of private gold ownership and trading.
An alchemy of financial measures initiated last summer include a decree that placed the gold bullion business of Saigon Jewelry Company, a dominant processor and trader, under the control of the central bank.
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 instead.
“They want to control the gold,” said a manager at Phu Quy Jewelry Company, whose digital signs feature the bid and ask prices for local “taels” — 37.5 grams of gold bullion.
“I really can’t say if it’s 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 fall well short of last year’s 18.6 percent cost-of-living rise.
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 due for another devaluation later this year.
“People have tried to control the damage by fleeing into gold,” said Le Dang Doanh, a former senior government economist.
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 are not yet public, but bankers say the government is considering ways to lure savers by offering better returns and security.
The government estimates that between 300 and 500 tons 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 stabilise the economy.
“If the profit is a little higher and the banks prove their credibility, I expect 80 percent of the public will deposit their gold,” Nguyen Thanh Truc, CEO of the Agribank Jewelry Company said.
The moves to rein in the gold trade come after a dramatic improvement of living standards since Vietnam started a shift to “market-oriented socialism.”
Two decades of economic growth lifted the country to middle income status in early 2011, as measured by the World Bank. But progress is threatened by macro-economic issues including persistently high inflation, and corruption.
A return to single-digit inflation would restore public confidence and cool gold fever, the economist Doanh said, adding that any policy has to address the Vietnamese reliance on gold as a form of security.
“If the policy acts against the interest of the people, they (will) move into informal trading which could hardly be controlled,” he said, adding that already an estimated 20 to 60 tons of gold is smuggled into Vietnam each year.
People on Hanoi’s Ha Trung Street, a hub of the busy gold trade, are skeptical of the government’s efforts.
“They will make it a bit harder, but I believe there will always be ways to trade the bars,” said Tran Hoang Long, a 40-year-old gold trader.