SINGAPORE — Vietnam is poised to permit companies to import gold for the first time in over a decade, aiming to bridge the gap between local and international gold prices, according to an industry official. The Vietnam Gold Traders Association (VGTA) has been in extensive discussions with the government to address the gold supply and demand imbalance, said Huynh Trung Khanh, the associations vice chair.

Since 2012, the Vietnamese government has maintained strict control over gold imports and local bullion sales, allowing only select large companies to import gold, provided it was repurposed as jewelry for export. The government indicated they will begin official gold imports by July or August. We hope that by July, gold companies will be allowed to import directly, Khanh said during the Asia Pacific Precious Metals conference.

The VGTA expects the policy change to take effect as early as next month, marking a significant shift from the current system where the central bank tightly controls imports. The State Bank of Vietnam did not immediately respond to a request for comment. Efforts to align domestic gold prices with international benchmarks, such as holding auctions and allowing four local banks to sell gold to increase liquidity, have largely failed, with domestic prices remaining high.

Reducing domestic price premiums is essential, as VGTA forecasts a surge in Vietnams gold demand this year. Vietnam is among the worlds top 10 gold consumers. Gold purchases are expected to rise 10% year-on-year to 33 million metric tons in the first half of this year, Khanh reported at the conference. Retail buyers, who use gold as a hedge against economic uncertainty, drive the majority of gold purchases in Vietnam, a country with a population of about 100 million people.

The sharp decrease in saving interest rates, the stagnant real estate market, and the continuous devaluation of the national currency against the US dollar are key reasons for strong retail investment demand, Khanh said. People have been queuing in the streets, in all weather, to buy more gold. Increased gold demand has also led to higher smuggling rates, particularly from neighboring Cambodia, making immediate policy action crucial, Khanh added. With such a big price hike, the rate of smuggling remains high.

The VGTA and the World Gold Council are collaborating with the Vietnamese central bank and other government agencies to establish a national gold exchange, which they believe will provide more market stability.

Disclaimer: This image is taken from Reuters.