Gold Is an Economic Lifeline for Vietnamese People

We write a lot about India because people in the country love gold. Even the poor buy gold in India. Indians value gold as a store of wealth, especially in poor rural regions. Two-thirds of India’s gold demand comes from these areas, where the vast majority of people live outside the official tax system. Gold is one of the engines that make the Indian economy run.

India gets a lot of attention because it ranks as the world’s second-largest gold consumer, but it isn’t the only country with an affinity for the yellow metal. Gold has played a vital role in the history and economy of Vietnam, and still serves as an economic lifeline for the Vietnamese people today.

Tulane School of Liberal Arts anthropology associate professor Allison Truitt has spent many years studying the social aspect of gold in Vietnam.

Truitt says many Vietnamese people lost faith in the country’s state-issued currency after periods of foreign occupation, countrywide turmoil, regime change and hyperinflation. To stabilize their economic condition, they turned to gold because it has “external value without borders.” Many Vietnamese people were displaced and ended up as refugees. Gold served as a store of wealth that was recognized wherever they went. Many refugees fleeing the country carried gold with them because they had no idea where they would end up. Regardless, they knew the value of their gold would be recognized.

Truitt said these attitudes persist today. Up until recently, Vietnamese banks were still offering domestic credit based on gold.

My interest in thinking about gold is not just at this moment but looking back to the historical circumstances: the flight of refugees, how gold was used as a payment to state officials so people could leave the country. Part of what I want to do as an anthropologist is to bring in those experiences because they’re a vital part of the stories that people tell around gold and why it has the currency that it does in Vietnam.”

Today, even a small gold bar is coveted capital in Vietnam.  Gold — whether in the form of bars, jewelry, or shares of gold funds — operates as a backup currency.

In a lot of places, it acts as the primary currency. The dong has depreciated significantly over the last decade. One dollar will buy you more than 22,000 dong. Just 10 years ago, a dollar was worth about 15,000 dong. No wonder the Vietnamese want to own gold.

According to a 2013 article on the Nomad Capitalist, the Vietnamese people hold as much as 400 tons of gold. That’s more than the entire stash of the Bank of England. Last year (2012), the Vietnamese came close to buying more gold per capita than the Chinese and Indians combined. This is a reflection of the culture’s value on tangible assets.

Unsurprisingly, the Vietnamese government has tried to bring all of that gold out of the underground economy. But as is generally the case, that’s easier said than done.

Because it’s estimated that much of that gold was ‘smuggled’ in, the central bank figures they can ‘convert’ the gold into dong deposits, forcing people to hold the very currency they wanted to avoid owning in the first place. If you can’t win by hook, win by crook. The central bank has already made itself the exclusive importer of bullion. To ‘reduce contraband,’ of course. (If the US government thought it could get away with limiting gold purchases to ‘prevent terrorism,’ they’d surely try.) State-owned Saigon Jewelry Company was also made the exclusive producer of gold bars, the preferred gold type in Vietnam.”

But like the Indians, the Vietnamese hold on to their gold, no matter what the powers that be want.

Americans value gold, but they don’t have the same passion for it that we see in Indians and Vietnamese. That’s probably because Americans view their government and currency as stable. But is that really wise?

Peter Schiff has been talking about an impending currency crisis. If that happens, Americans might just find out how valuable gold really is.

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