Vietnam to Launch Online Gold Exchange, Allows Imports After Decade

Vietnam Unveils New Initiatives for Gold Market

Vietnam is planning significant changes to its gold market, aiming to launch an online gold exchange and allow qualified companies to import gold starting next month. This marks the first such move in a decade, and is intended to stabilize soaring domestic gold prices, while also stimulating economic growth by mobilizing private resources.

According to Vietnamese state media, the State Bank of Vietnam (the central bank) is exploring international best practices to develop the online exchange. Vietnamese newspaper 'dantri' reported that Deputy Governor of the central bank, Pham Quang Dung, stated that the bank is considering two options: trading gold on the Mercantile Exchange of Vietnam or within the planned international financial center.

Policy Background: Stabilizing Macroeconomics and Curbing Gold Prices

As one of the fastest-growing economies in Southeast Asia, Vietnam is striving to maintain macroeconomic stability. Prominent scholars have previously warned that rapid credit expansion could fuel asset price bubbles. Gold is a popular investment choice in Vietnam and a store of value, making stabilizing its price an important goal for the central bank. Despite efforts to increase gold supply through central bank auctions and commercial bank supplies, domestic prices have risen by 60% this year and remain about 23% higher than international prices as of Thursday.

A government decree, seen by Reuters, will allow qualified companies to import gold starting October 10. The State Bank of Vietnam will issue gold import licenses and set annual quotas.

Potential Trade-offs: Balancing Price Stability and Exchange Rate Pressures

Economist and former Vice Dean of the Vietnam Economic Management Academy, Vo Tri Thanh, points out that increased gold imports could help cool domestic prices and reduce the difference with international prices, but it could also put pressure on the exchange rate.

"Importing gold requires using US dollars, and the larger the imports, the greater the dollar outflows," Vo Tri Thanh explained.

The State Bank of Vietnam announced earlier this week that the decree issued on August 26 will also end the central bank's monopoly on gold bar production, aiming to increase supply and promote competition and transparency.

Regulatory Oversight: Combating Irregularities and Corruption

The State Bank of Vietnam will strengthen oversight of gold trading businesses to prevent money laundering, speculation, smuggling, and illegal transactions.

Notably, Vietnamese police have filed a lawsuit this week against the former CEO of Saigon Jewellery Company, one of the contractors for the State Bank of Vietnam for gold bar production, on charges of embezzlement and abuse of power.

Further Analysis: The Impact of Fintech on the Gold Market

The launch of an online gold exchange marks a significant step towards integrating fintech into Vietnam's gold market. This exchange could provide a more transparent and efficient platform for trading gold, potentially attracting more investors and reducing reliance on traditional channels. However, it's crucial to consider potential challenges, such as cybersecurity and the need for effective regulation to ensure market integrity and protect investors.