Shipments of precious stones and metals significantly boosted Vietnam’s export earnings in the first quarter of 2009, confirming the trend last year when their value surged to US$2.3 billion from a mere $46 million the year before.

Gold traders and banks with export permits were heavy buyers in the domestic market last quarter as they tried to fill the copious bullion orders coming in from abroad.

They purchased not only gold taels but also gold jewelry to melt down (a tael is a traditional measure roughly equal to 1.2 oz.).

Sacombank Jewelry Co. melted down some 22 kilograms of gold jewelry a day in the first three months of the year, says chief executive Nguyen Ngoc Que Chi.

She says there is an acute shortage of gold bullion in Vietnam, and notes that the big jewelry fabricators (like SJC and PNJ) have yet to receive their 2009 production quotas from the central bank.

“Perhaps the central bank is worried that further gold imports will widen the trade gap. Furthermore, importing gold needs a lot of dollars, which could strengthen the dollar against the dong.”

Vietnamese citizens in untold numbers are hanging on to their gold as a kind of insurance and refusing to sell it in these uncertain times, exacerbating the shortage.

So, until the import ban is lifted, there will be little gold to feed the fabricators of jewelry and taels, let alone fill all the foreign orders.

Market observers make the point that, without more gold imports, bullion and gold jewelry will shoot up in price, to the detriment of everyone except those Vietnamese already sitting on a sizeable stash.

Source: Dau Tu Chung Khoan