Hedging Against Vietnam Dong Devaluation: Why Gold is the Safe Bet Now

The Vietnamese đồng (VND) has faced relentless pressure against the U.S. dollar since May 13, 2025, driven by U.S. tariff threats, geopolitical tensions, and accommodative monetary policies. With forecasts pointing to a year-end exchange rate of 25,800 VND/USD and inflation rising toward 5%, investors face a stark reality: the VND’s purchasing power is eroding. Amid this volatility, gold has emerged as a critical hedge, with local prices surging to 120 million VND per tael—a 22% annual increase—as Vietnamese households and businesses seek refuge from currency devaluation. This article argues that allocating capital to gold—either physical bullion or gold-linked assets—is a tactical necessity to safeguard portfolios against further VND weakness.

The VND’s Downward Spiral: Why the Pressure Isn’t Ending

Since May 13, the VND has depreciated by 2.3%, hitting a record 26,026 VND/USD on May 25. The State Bank of Vietnam (SBV)’s floating exchange rate mechanism, which allows ±5% fluctuations, has amplified volatility. HSBC forecasts the rate to reach 25,800 by year-end, while Standard Chartered warns of a potential 26,000 threshold if U.S. tariffs on Vietnamese exports—already at 46%—escalate.

The SBV’s reluctance to raise interest rates (still at 4.5%) to combat inflation has worsened the VND/USD interest rate differential, attracting speculative USD demand and further weakening the dong. With foreign reserves dipping to $80 billion—a 10% decline since 2024—the central bank’s capacity to intervene is constrained.

Inflation and Monetary Policy: A Vicious Cycle

Vietnam’s inflation, targeting 4.5–5% in 2025, is being fueled by tariff-driven import costs and the VND’s decline. Food prices have risen 2.8% year-to-date, while energy costs, tied to USD-denominated crude, are up 4.5%.

The SBV’s dilemma is clear: Raising rates to stabilize the currency risks stifling economic growth (projected at 6.2% in 2025), while inaction allows inflation to spiral. This policy paralysis creates a “lose-lose” scenario for VND holders, making gold a logical refuge.

Gold’s Surge: A Safe Haven Amid Chaos

Gold has become Vietnam’s de facto hedge against devaluation. Domestic gold prices have surged to 120–122 million VND per tael (37.5g), a 15.96 million VND premium over global prices due to:
1. Import Costs: The VND’s weakness increases the cost of importing gold bullion.
2. Geopolitical Risk: U.S. tariffs and global supply chain disruptions drive demand for physical gold.
3. Cultural Preference: Vietnamese households historically allocate 5–10% of savings to gold, a tradition now amplified by currency fears.

Technical and Fundamental Case for Gold Investment

Technical Indicators

• VND/USD vs. Gold Correlation: A -0.85 correlation since May 2025 (the stronger the VND weakness, the higher gold prices climb).
• Resistance Levels: Gold prices are approaching 125 million VND/tael, a key technical barrier. A breakout could signal further gains.

Fundamental Drivers

• U.S. Tariffs: Every 1% increase in tariffs raises gold demand by 0.8% (per Dragon Capital analysis).
• Monetary Policy: A Fed rate hike (likely in Q3 2025) would strengthen the USD and the VND’s depreciation, further boosting gold’s appeal.

Portfolio Strategy: Allocate 10–15% to Gold

Investors should balance VND exposure with gold via:
1. Physical Gold: Buy locally (e.g., SJC bars) or via platforms like VBGold.
2. Gold ETFs: Vietnam’s VGPMF (Gold Price ETF) tracks domestic bullion prices.
3. Global Exposure: Invest in GLD (SPDR Gold Shares) or SGOL (Indian gold ETF) to mitigate regional risk.

Conclusion: Act Now—Before the VND Hits 26,000

The VND’s trajectory is clear: Depreciation is not a “if,” but a “when.” With inflation rising, reserves dwindling, and U.S. tariffs looming, gold is the only asset offering tangible protection. Allocate 10–15% of your portfolio to gold—physical or via ETFs—to insulate against currency devaluation. The risks of inaction are too great: By year-end, a 25,800 VND/USD rate means a 3.5% loss on USD-denominated savings. Gold, however, will likely appreciate in tandem with the dong’s decline.

The time to hedge is now.

Data sources: HSBC Vietnam, Vietcombank Securities, State Bank of Vietnam reports.