Many Asian countries have strong affinity for gold, with Vietnam apparently at the top of the list. On a per-capita-income basis, Vietnam consumes twice as much gold as India and 10 times that of China.
Vietnam’s gold market has blossomed in response to a lack of confidence in the country’s currency, according to a story in yesterday’s Financial Times. Since the beginning of 2009, the Vietnamese dong has lost 11 percent of its official value, while gold has risen roughly 42 percent in U.S. dollar terms.
This has spurred many Vietnamese banks to seek out more gold. Last year, as the world climbed out of a crisis, Vietnamese banks paid 3 percentage points more in interest to those making deposits in gold than deposits in dollars.
A key quote from the story: “Demand [for gold] is still growing because people don’t believe in any other channel of investment.”
Vietnam (population 86 million) has seen rapid economic growth in recent years. Its per-capita income of $1,050 last year was nearly fivefold higher than it was in the mid 1990s, and in Hanoi, the income level is closing in on $2,000 per person, according to government figures.
Net retail gold investment in Vietnam reached 14.1 metric tons (543,000 ounces) during the first quarter of 2010, up 36 percent year over year, according to the World Gold Council. Add to that a 20 percent increase in gold jewelry demand, and you see a steadily growing gold market.
Those figures don’t reflect the amount of gold that isn’t tracked or deposited in banks. A Vietnam-based economist estimates that some $30 billion worth of “street gold”—almost a third of the country’s GDP—is held outside of the banking system.
In absolute terms, the Vietnamese gold market may pale in comparison to China and India, but its strong cultural connection and history with gold should keep the country’s gold market an active one regardless of price.