Vietnam is expected to allow companies to import gold for the first time in a decade, an industry official told Reuters, as it aims to close the widening gap between local prices and international standards.

The Vietnam Gold Traders Association (VGTA) is in lengthy discussions with the government on measures to correct the imbalance in gold supply and demand, said Huynh Trung Khanh, vice president of the association.

The Vietnamese government took virtually full control of imports and sales of local bullion in 2012, with certain major companies allowed to import provided they repurposed it as jewelry for export.

“The government said it will start formal import of gold by July or August. We hope that by July they will allow gold companies to import directly,” Khanna said on the sidelines of the Asia-Pacific Precious Metals Conference. but said

The VGTA expects the proposed change to begin early next month. This would mark a significant departure from the current policy, under which the central bank tightly controls imports. The State Bank of Vietnam did not immediately respond to a request for comment.

Efforts to narrow the gap with international benchmarks by holding auctions and allowing four local banks to sell gold to raise liquidity have largely failed to have sustained impact, with local prices still below global prices. Competitors are trading at stubbornly higher premiums.

An immediate reduction in the premium on domestic prices is critical, as VGTA estimates that Vietnam’s gold demand will increase this year. The southeastern country is among the top 10 consumers of gold.

Khanna, in his presentation at the conference, said gold purchases during the first six months of this year will increase by 10 percent year-on-year to 33 million metric tons.

Retail buyers, who see gold as a wealth protection tool used to hedge against economic uncertainty, account for the bulk of purchases in the Southeast Asian economy, home to about 100 million people. are

“The main reasons for this strong retail investment demand were the sharp decline in interest rate savings, real estate freeze and continued depreciation of the national currency against the US dollar,” Khan said.

“We have people lining the streets, sun and rain, to buy more gold.”

Khanna said the demand for gold has also been fueled by increased smuggling, particularly from neighboring Cambodia, adding that this made urgent policy action important.

“It’s a huge underground system network. Even after such a big increase in prices, the smuggling rate is still high.”

VGTA and the World Gold Council are currently working with the Central Bank of Vietnam and other government agencies to establish a national gold exchange, which they believe will further stabilize the market.

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