(from today's Sovereign Man email Here's something you don't see every day: Banks in Vietnam will actually pay YOU to store your gold in one of their safe deposit boxes. I was pretty surprised to find this out for myself; neither Simon nor I have seen it anywhere else in the world except here. This is actually how banking used to be. The original bankers were goldsmiths-- big burly guys who worked with gold on a daily basis. They had the security systems already established, and, for a fee, they were willing to let you park your gold in their safes. Eventually, goldsmiths got into the moneylending business; instead of charging a security fee, they would pay depositors a rate of interest for the right to loan out the gold at a higher rate of interest. Goldsmiths' reputations lived and died based on the quality of their loan portfolios, and their consistency of paying back depositor savings. Today that's all but a footnote in history. Except in Vietnam. Vietnam's economy enjoyed a strong boom in the mid-2000s thanks to economic liberalization and foreign capital inflows. Within a few years, the economy overheated and inflation became rampant. Then came the global financial crisis. The Vietnamese government's response, as it has been with governments all over the world, was to print more money. This further exacerbated the inflation problem and undermined confidence in the currency. The unfortunately named Vietnamese dong has been devalued to the point where it now has an absurd number of zeros. Over the past 3 years it has lost some 30% of its value against the US dollar-- it now takes about 21,000 dong to buy just one US dollar. Against stronger currencies such as the Aussie dollar and Canadian dollar, the dong has plunged even further. As such, it comes as no surprise that the Vietnamese people don't trust their government's paper money. They prefer to earn dollars and keep their savings in gold. Banks have jumped on board, encouraging gold deposits by offering attractive interest rates. Property prices are frequently quoted in gold as well. It's cultural-- the average guy on the street is very aware of gold and probably knows the price. The government doesn't like this at all because it can't print dollars or gold. So, it is discouraging their use, forcing non-tourist business owners to exclusively use the dong. The government has also introduced regulations to discourage gold hoarding. Technically, it's not permissible now for Vietnamese banks to pay interest on gold deposits anymore, but it still happens in practice. So much for Warren Buffet's assertion that gold is just a silly cube that doesn't pay any yield. It's ironic that places like Vietnam are considered poor, backward, and undeveloped by the West... and yet it's precisely these same people who are smart enough to culturally reject worthless government-issued paper currency in favor of something that is naturally scarce and lacks counterparty risk. We should all be so wise...
Yeah... not a country I would be sticking my gold into a safe deposit box. There's sovereign risk, and there's sovereign risk!
Isnt taking gold out of Vietnam actually .. banned? So what if you can store it there if it cant be moved outside.
Interesting post as it shows the future potential for PMs. A future world where gold and silver underpin the fiat currency. A reservoir of PMs that is held in trust as an exchange for fiat. No so much as "Back to the Future," but "Forward to the Past."
I know silver isn't because i've taken some out before. Gold i'm not 100% sure but i would be surprised if it wasn't permitted to be taken out.
Damn.. the way gold is used over there,and how it is so abundant compared to over here is pretty cool. Pity about all these changes coming into effect. Curious as to whether the export of gold will affect someone leaving the country with 1 chi or a few 1 luong bars? Will find out when i go there next. Also interested in the above 5th paragraph where at the end it says "mobilizing gold from local residents". I wonder what that means.. don't think it will mean directly taking gold from citizens, but more like copying the west and take away some of the benefits such as getting interest from gold that is deposited in banks, aswell as measures mentioned in above article. Basically make gold less desirable and push people back towards fiat. Good luck, it may take a while.
Vietnam goes nuclear on gold -- Posted Thursday, 12 April 2012 | Source: GoldSeek.com By Jan Skoyles http://news.goldseek.com/GoldSeek/1334240700.php
Any problem taking your gold out of Vietnam? Perhaps you have heard that India is hassling women coming IN with their jewellery.
Officially, the problem Indian Customs has with jewellery isn't bringing in gold, but charging an import tax. Any 'unofficial' gratuities paid in foreign currency or bottles of Johnny Walker (or prestige alcohol) can also help clear out matters.
I wouldn't store gold in Vietnam even if they offered to triple my physical holdings once its in their vault.
www.sbj-cambodia.com See above link for those who may be visiting Cambodia. You get thr best of both worlds - Cambodia's open economy (whole other subject, but at least it is not state socialist Vietnam) and physical gold account. I am not certain however that it is allocated. How do we know they don't use the 'cleve' fractional reserve money lending with your gold too? I enquired from the msin (only?) branch on Norodom boulevard. Not sure if you can still buy bullion without an account. I don't have my notes handy regarfing interest rates, ehich as I recall could not come close to Cambodia's other banks rates for fiat currencies. ANZ Royale (joint venture) pays 3.5% onone year USD term deposits, ABA Bank pays 3.25% on USD if you are willing to not touch it for 45 days. Mictofinancing institutions pay 7.5 - 9% on multi year term. KHD (local currency, although the bation effectively uses USD) pays even better. The reason I didn't and haven't participated with SACOM is because only now are they getting even local use ATMs, I believe it is a state (Vietnam) owned bank, Vietnam periodically has bank scandals, and the bank is new. Non-residents pay 14% capital gains tax in Cambodia. This can be reduced to 6% for 'residents' by buying a six month visa and bringing in a letter of employment or apartment lease. Check local expat forum khmer440.com for discussion on SACOM. Be forewarned the regulars can be a negative, sarcastic bunch.
I forgot the principle reason I didn't buy... In 2012 there was a bank scandal in Vietnam.As I recall someone in SACOM's (?) top management resigned. Add to that that in the same year (?) the government of Vietnam discovered that some gold being sold was fraudulent (underweight I believe it was). So, they recalled gold, melted in down in a one company's mark, or some such. I have no time to google this and even if I did my copy and paste doesn't work on this tablet anymore. Those more astute can fill in the details or correct my errors. There is no depositors insurance in Cambodia. One bank did fail and as I recall the gov't of Cambodia made good on it anyway. Next time, who knows? Short story: caution is advised.
