UPDATE 2-Vietnam may allow gold imports if local prices jump

Published 10/07/2010, 01:00 AM
Updated 10/07/2010, 01:04 AM
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* World gold hits record high, news from Vietnam a factor

* Import ban imposed in mid-2008 to help cut trade deficit (Adds details, quotes)

By Ngo Thi Ngoc Chau and John Ruwitch

HANOI, Oct 7 (Reuters) - Vietnam's central bank said on Thursday it would consider granting permits for gold imports if prices in the domestic market rose "unreasonably high", helping to drive world bullion prices up to another record.

Spot gold , which has rallied 8 percent over the past month, hit an all-time peak for a third straight session on Thursday, rising above $1,355 an ounce, as a weak dollar pushes investors to bullion in the face of economic uncertainty and speculation of further monetary easing by central banks.

Nguyen Quang Huy, director of the foreign exchange department of the State Bank of Vietnam, said gold prices were still largely in line with world markets but the central bank was closely monitoring the situation.

"If gold prices in the country rise unreasonably high, the state bank may consider giving permission to businesses to import gold, at appropriate volumes and times, to stabilise the market so that the price of gold in the country sticks with the price of world gold," he said on the central bank's website, www.sbv.gov.vn.

Dealers said the Vietnamese comments helped nudge the price of gold up.

"People are going to focus on the fact that the Asian physical market will be tight. Last time Vietnam opened the door to gold imports, gold went up $20. In percentage terms, it could translate into $30 today," said a Singapore-based trader.

In Vietnam, gold rose to 32.80/32.89 million dong per tael by 0330 GMT from 32.67/32.75 million early on Thursday, according to Saigon Jewelry Corp, the country's biggest gold dealer. One tael equals 1.21 troy ounces.

The unofficial exchange rate stood at 19,800/19,850 dong per dollar at a major Hanoi gold shop, putting the gold price in Vietnam at a premium of about $20 to global market prices.

Vietnam banned gold imports in mid-2008 to help tackle a trade deficit as the economy overheated, but the central bank has granted import quotas on a selective basis since.

REPEAT SCENARIO

Foreign exchange dealers have said the rise in global gold prices, and curbs on imports, had fed smuggling. Demand for dollars to buy this gold overseas was pushing down the value of the dong.

The scenario appears to be a repeat of pressures that built up in Vietnam about a year ago, leading the central bank to grant quotas for several tonnes of gold imports.

The pressure on the dong continued, however, and the central bank devalued the currency and raised interest rates just weeks after relaxing the import ban.

Nguyen The Hung, chief executive officer of Vietnam Gold Corp, said domestic supply was limited as investors had sold and businesses had increased gold exports when prices hit 29-30 million dong per tael.

He said the differential between domestic and world gold prices had to be addressed. "The gap requires measures from the central bank," he said.

Traders said there had been a significant amount of gold smuggled into Vietnam from neighbouring countries and Thailand.

For a snapshot of the latest exchange rates and gold prices, click [VN-SNAPSHOT]. (Additional reporting by Rujun Shen and Lewa Pardomuan in Singapore; Editing by Alan Raybould and Clarence Fernandez)

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