In Vietnam, it would seem, gold should be mobilized only after the government is in a position to call the shots.
There would seem to be a deeper trend here. Vietnam, Turkey and India are all emerging economies whose governments, faced with currency and balance-of-payments problems, have identified gold as an area worthy of attention. So far, Turkey is considering the carrot of paying interest on deposits and giving incentives to banks to hold gold. But the experiences of India and Vietnam suggest that at some point it may choose to pick up a stick.
Another country whose authorities may be paying closer attention to its citizens’ appetite for gold is China. As reported last month, some dealers are finding that it now takes longer to import gold since importers need to get permission from the State Administration of Foreign Exchange as well as the People’s Bank of China.
China saw its gold imports from Hong Kong triple last year. Are authorities beginning to worry about the impact of gold on the country’s trade position?
If emerging-market policymakers continue to flex their regulatory muscles, this could have significant implications for global gold demand. Consumers in India and China accounted for one of every two ounces of gold bought last year. The growth in demand from these two countries — from China in particular, which only deregulated its gold market at the start of the last decade — has been a driving force behind gold’s bull market.
There’s probably a limit to how far policymakers are willing to risk alienating populations who have demonstrated a desire to buy gold. In India, Mukherjee has said he does not intend to raise duties any further; time will tell if the government sticks to that. In Vietnam, for all of its many decrees, leaders have been keen to pay lip service to private gold ownership and have said they will continue to permit it.
So where’s the limit? Stay tuned.