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Vietnam battles to control 'gold fever' as price soars

HANOI -- Stashing gold at home rather than having cash in the bank is a generations-old habit in communist Vietnam, but a recent surge in prices has sparked government attempts to bring the yellow metal to heel.

Last year the country bought more gold per capita than India or China, according to the World Gold Council, and domestic prices soared by 18 percent — far outstripping the global market's 11 percent increase.

And old habits are dying hard, according to 60-year-old retiree Truong Van Hue, even if an ounce of gold bullion can now cost up to US$100 more in Hanoi than anywhere else in the world.

“I still like to keep my savings in gold. It's safe for retired people like me. I can sell the gold any time, anywhere, when I need cash,” he told AFP.

Although the treasure has long been perceived as a safe haven, the recent gold rush has alarmed Vietnam's government, which is faced with an 18 percent inflation rate and an unstable national currency, the dong.

Officials are trying to dampen the gold fever by bringing the trade back into their hands, almost two decades after they formally legalised the already-common practice of private gold ownership and trading.

An alchemy of financial measures initiated last summer include a decree that placed the gold bullion business of Saigon Jewelry Company, a dominant processor and trader, under the control of the central bank.

Limiting widespread street-level trading of gold will, the official line goes, reduce price volatility and prevent retail investors from pouring into the precious metal, which undermines the already-shaky dong.

To this end, officials are also considering a second measure which could force more than 10,000 jewelry shops to get out of the bullion business and focus strictly on jewelry instead.

“They want to control the gold,” said a manager at Phu Quy Jewelry Company, whose digital signs feature the bid and ask prices for local “taels” — 37.5 grams of gold bullion.

“I really can't say if it's a good or bad idea. But here in Vietnam we need (economic) stability,” he said, on condition of anonymity.

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In this file picture taken on Aug. 19, 2011, customers buy and sell gold at a local gold shop in Hanoi. Gold closed at record US$1,863 an ounce in Asia on Aug. 19, 2011. Stashing gold at home rather than cash in the bank is a generations-old habit in communist Vietnam, but a recent surge in prices has sparked government attempts to bring the yellow metal to heel. (AFP)

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