Opening the gold market will reduce dollar hoarding for gold imports, easing the pressure on the foreign exchange market, a government advisor said.
When the gold market is opened, there will no longer be a large gap between local and international gold prices that could incite imports, Deputy Chairman Le Xuan Nghia of the National Financial Supervisory Commission told Thanh Nien.
"So far Vietnam has controlled the market with import and export quotas because there have been worries that trading gold freely may reduce the country's foreign reserves," Nghia said. "But this needs to be reconsidered."
He said controlling the market through quotas can only be effective in a small market, not in a large market with a value in the tens of billions of dollars.
"As local gold prices are always higher than international prices, many speculators accumulate gold imports, which leads to higher demand for foreign currencies," he said.
Worldwide, the price of gold has gained 25 percent so far this year, but in Vietnam gold has surged 35 percent.
The Financial Supervisory Commission, the State Bank of Vietnam and concerned agencies are mapping out a new plan for the management of the local gold market, Nghia said.
He also noted that his commission agreed with a proposal by state lender BIDV to open a national gold exchange in 2011 to help bring structure to the trading of the precious metal.
"The establishment of the exchange will allow investors to invest in gold officially under the control of the government," Nghia told Thanh Nien.
The exchange will operate like a stock exchange in both Ho Chi Minh City and Hanoi where gold will be traded in the form of certificates, Nghia said.
Vietnam had closed all 20 gold exchanges in the country by the end of March in an attempt to eliminate risks posed to the national financial system.