Vietnam's central bank granted permits for gold imports to several firms on Thursday, giving each a quota of 200-300 kg in a bid to narrow the spread between gold prices in the country and in world markets.
The licenses were issued on Thursday afternoon and are valid through Oct. 12, according to a report on Vneconomy.vn, the online version of the Vietnam Economic Times.
Vietnam effectively banned gold imports in mid-2008 to help tackle a trade deficit as the economy overheated, but the central bank has granted import quotas on a selective basis since then.
A source with direct knowledge of the licensing and quotas said nine firms were part of the arrangement, which would put the total volume somewhere between 1.8 and 2.7 tonnes.
There was no immediate comment from the State Bank of Vietnam, which earlier published an interview on its website quoting a senior official as saying the central bank would consider granting new licenses if the price on the domestic market rose "unreasonably high."
Spot gold, which has risen some 8 percent over the past month, hit an all-time high for a third straight session on Thursday, rising above $1,360 an ounce, as a weak dollar pushed investors into bullion in the face of economic uncertainty and speculation of further monetary easing by central banks.
The import licenses were the first granted by the State Bank of Vietnam since February, and came in reaction to a widening spread between onshore prices and those on world markets.
Although the volume is limited it will have "a positive psychological effect" on the market, Vneconomy quoted Nguyen Thi Cuc, deputy director of importer Phu Nhuan Jewelry Co, as saying.
In Vietnam, gold in Hanoi had eased to VND32.77/32.85 million per tael by Thursday evening after rising as high as VND33.07/33.15 million earlier, according to Saigon Jewelry Co Ltd, the country's top dealer. One tael equals 1.21 troy ounces.
The unofficial exchange rate was quoted earlier at around VND19,800/19,850 per dollar at a major Hanoi gold shop , putting the gold price in Vietnam at a premium then of about $20 to global prices.
Markets will be tight
Earlier, the central bank's website quoted Nguyen Quang Huy, director of the foreign exchange department of the State Bank of Vietnam, as saying new imports might be permitted "at appropriate volumes and times, to stabilize the market".
Dealers in Asia said the Vietnamese comments helped nudge the price of gold up on the international market.
"People are going to focus on the fact that the Asian physical market will be tight. Last time Vietnam opened the door to gold imports, gold went up $20. In percentage terms, it could translate into $30 today," said a Singapore-based trader after
Foreign exchange dealers have said the rise in global gold prices, and curbs on imports, had fed smuggling. Demand for dollars to buy this gold overseas was pushing down the value of the dong.
A similar scenario unfolded a year ago, leading the authorities to issue gold import licenses then, too. The pressure on the dong continued, however, and the central bank devalued the currency and raised interest rates just weeks after relaxing the import ban.
Traders said gold was being smuggled into Vietnam from neighboring countries and Thailand.
Nguyen The Hung, chief executive officer of Vietnam Gold Corp, said domestic supply was limited as investors had sold and businesses had increased gold exports when prices hit VND29-30 million per tael.
Speaking before the new licenses were announced, he said the differential between domestic and world gold prices had to be addressed. "The gap requires measures from the central bank."