<p>Gold demand has reached such a fevered pitch in Vietnam that the government is taking aggressive measures to crack down on smuggling.</p>
<p>I often talk about the fact that gold is money. In Vietnam, consumers are using it that way. According to a report by <em>Nikkei Asia</em>, “<em>The metal is so popular that locals have quoted the prices of motorbikes and homes in gold instead of dong.</em>”</p>
<p>Now, Hanoi is trying to “cool the gold fever” that has pushed significant demand into the black market.</p>
<p>Vietnam ranks as Asia’s third-largest gold market behind China and India.</p>
<p><a href="https://www.moneymetals.com/gold-price">Gold prices</a> are higher in Vietnam because, up until December, the government maintained exclusive control over the market.</p>
<p>In 2012, the government ended the exclusive production rights of state-owned enterprises and centralized gold bar production under the State Bank of Vietnam (SBV). A combination of the government monopoly and strong demand has pushed gold to a premium in the country.</p>
<p>The government surrendered its monopoly in December, replacing it with a licensing regime<em> </em>that allows qualified banks and private enterprises to produce and trade gold bars and participate in import/export. The reforms should ease supply shortages and bring prices closer to global averages; however, it will take time for the price to respond.</p>
<p>Unsurprisingly, people are trying to avoid higher prices and shortages by smuggling.</p>
<p>Under the new regulations, anybody caught smuggling gold across the border faces a 100-million-dong fine (around $3,850). Buying gold from unlicensed sellers carries a 20-million-dong penalty.</p>
<p>The Vietnamese government learned a lesson on monopolies the hard way.</p>
<p>Last year, a former Saigon Jewelry Company director received 25 years in prison for embezzlement and abuse of power. According to the VietNamNet news site, the government monopoly "<em>provides the perfect conditions for power to morph into unchecked privilege</em>.” In an opinion article responding to the verdict, the news organization wrote, "<em>Where there is no competition, oversight becomes ineffective, and profiteering opportunities flourish</em>."</p>
<p>The Vietnamese people have a cultural affinity for gold, much like the Chinese and Indian people. A World Gold Council survey found that 80 percent of Vietnamese people consider gold "<em>a good safeguard against periods of political/economic uncertainty</em>," and a hedge against inflation.</p>
