Central Bank Snuffs Out Vietnam’s Thriving Gold Market

Central Bank Snuffs Out Vietnam’s Thriving Gold Market
Profile photo of Kel Kelly

In recent years gold has become a sought-after currency in Vietnam. Why? The usual reason: its government has been printing too much money, causing prices to rise, and causing its currency, the Vietnamese dong, to plummet in value.

But by holding gold instead of the domestic currency, Vietnamese citizens know their wealth’s value will be kept constant while the local currency declines. In local currency terms, they will actually make money. The chart below shows how much gold has increased against the Vietnamese dong since 1995.

There is such a demand to hold gold in Vietnam that the public is now holding some 300 to 500 tons of gold, totaling U.S $30billion. Such large gold holdings led to gold being used as a common medium of exchange. Vietnamese citizens stored their gold holdings in banks, and opened deposit accounts denominated in gold. Banks have actually been paying customers to store their gold so that the banks can use it in loans, which have lower interest rates associated with them than do dong-based loans, presumably because of a lack of inflation risk.

Recently, however, the government-run Vietnamese central bank disallowed loans in gold. Now, it is preventing banks from paying interest to customers on their gold. Instead, it is forcing banks to charge customer to store their gold, and requiring banks to regularly report on their transactions with account holders.

What’s happening is that the government wants to prevent citizens from using alternatives to its own quickly devaluing currency. This, way, the government can continue to steal purchasing power from its citizens through inflation.

Offensive as this all is, it is not—yet—as offensive as steps the U.S. government took in 1933. The government made it outright illegal to own real money (gold) so that people would instead have to own the government’s rapidly depreciating paper currency.

  • Fred@Finance Blog

    I still feel bitter that Gordon Brown the worst prime minister the UK has seen for some time sold our gold at 2005 rates…

  • anarchobuddy

    It's very interesting that the USA didn't allow Americans to hold gold at the time it went to war against Vietnam, the communist country that allows the people to own gold (and hopefully earn interest upon it openly once again).

  • tim

    controll , controll , controll , so there told what they can trade with and what they cant . just print enough for everyone and we can all have what we want . you must subscribe or they lose controll.

Profile photo of Kel Kelly

Kel Kelly has spent over 13 years as a Wall Street trader, a corporate finance analyst, and a research director for a Fortune 500 management consulting firm. Results of his financial analyses have been presented on CNBC Europe and in the online editions of CNN, Forbes, BusinessWeek, and the Wall Street Journal. Kel holds a degree in economics from the University of Tennessee, an MBA from the University of Hartford, and an MS in economics from Florida State University. He lives in Atlanta.

More in Blog

Screen Shot 2015-11-21 at 10.50.52 AM

The Fed’s Bloody Hands

Doug FrenchNovember 21, 2015

Are Culture, Public Transport, Public Health, Education, and Technology Public Goods?

Ash NavabiNovember 16, 2015

ICPM is This Friday! Meet the Faculty and Register!

Mises CanadaNovember 3, 2015

Everything Is On Sale Compared to 1979

Marian TupyOctober 30, 2015
Money isolated on white  background

First they came for the cash, then they came for the microwaves

David HowdenOctober 30, 2015

The logic of sovereignty and unilateral free trade

Patrick BarronOctober 30, 2015


Mises CanadaOctober 29, 2015

My letter to the WSJ re: Two kinds of refugees, people and money

Patrick BarronOctober 27, 2015

On Symbolism in Science

Ash NavabiOctober 27, 2015