The Golden Hedge: Vietnam's Gold Market in the Crosshairs of U.S. Trade Policy

Vietnam's gold market has emerged as a critical barometer of economic instability in 2025, driven by the interplay of U.S. trade policy shifts, currency depreciation, and inflation. For investors, the market's volatility offers both risks and opportunities—if one can decode the macroeconomic signals hidden in the data.

The USD/VND Exchange Rate: The Primary Catalyst

The Vietnamese dong's (VND) weakening against the U.S. dollar has been the single largest driver of gold price surges. Since early 2025, the USD/VND midpoint has climbed from 25,058 VND/USD in January to a record high of 26,209 VND/USD on June 23—a 4.6% appreciation of the dollar in just six months. This trend is reflected in the price of gold:

The correlation is stark. When the VND weakens (USD/VND rises), gold prices in Vietnam surge due to two mechanisms:
1. Purchasing Power Erosion: As the VND loses value, gold—a dollar-denominated asset—becomes more expensive in local currency terms.
2. Inflation Hedging: Vietnam's April 2025 inflation rate hit 3.12%, exceeding the central bank's 3% target. Households and businesses turn to gold to preserve wealth.

Trade Policy: The Sword of Damocles

U.S. trade policy remains the wildcard. Initially, fears of 46% tariffs on Vietnamese exports to the U.S. sent gold prices spiking to 73.64 million VND/ounce in mid-June—a 48.6% jump from June 2024. However, the subsequent reduction to a 20–25% tariff regime in late June caused a temporary dip, as investors reassessed risks.

The critical takeaway: tariff outcomes directly correlate with gold's volatility. A further easing to 16% tariffs (via rules-of-origin reforms) could stabilize the VND, reducing gold's appeal. Conversely, higher tariffs would reignite inflation and strengthen gold demand.

The Central Bank's Dilemma: Growth vs. Stability

The State Bank of Vietnam (SBV) faces a tough balancing act. To support exports, it has allowed gradual VND depreciation—a strategy that risks fueling inflation. Meanwhile, low foreign exchange reserves ($80 billion, down from $100 billion in 2024) limit its ability to intervene.

Investors should monitor two SBV signals:
1. Interest Rate Cuts: A reduction in rates to boost growth could weaken the VND further, lifting gold prices.
2. Foreign Reserves: A drop below $75 billion would signal acute instability, pushing gold into “safe-haven” mode.

Trade Surpluses: A Narrowing Cushion

Vietnam's trade surplus has shrunk from $7.7 billion in Q1 2024 to $3.16 billion in Q1 2025, as imports outpace exports (19% vs. 14.5% growth). This imbalance exacerbates the VND's weakness.

A sustained surplus contraction could force the SBV to let the VND weaken further—good for gold, bad for dollar-linked assets.

Investment Strategy: Timing the Volatility

1. Allocate to Physical Gold (SJC Products):
2. Why: SJC bars and coins are liquid, with narrower premiums (10–15% above global prices) compared to ETFs.

3. Target: Hold 5–10% of your portfolio in physical gold, rebalancing after significant dips or tariff-related shocks.

4. Track the USD/VND Rate:

5. A breach of 26,500 VND/USD would signal a gold price jump toward 80 million VND/ounce.

6. Conversely, a drop below 25,800 VND/USD (due to tariff easing) could trigger a correction to 65–70 million VND/ounce.

7. Monitor Global Gold ETFs:

8. Why: Inflows into gold ETFs (e.g., GLD) surged to 310 tonnes YTD 2025, driven by geopolitical risks.
9. Action: Use GLD's price movements as a leading indicator—its rise often precedes Vietnam's local gold spikes by 2–3 weeks.

The Bottom Line

Vietnam's gold market is a microcosm of its economic challenges: a weak currency, trade tensions, and inflation. For investors, the key is to position for volatility while hedging against systemic risks.

Act now if:
- The USD/VND rate exceeds 26,300 VND/USD (projected by Q3 2025).
- U.S. tariffs remain above 20%, keeping inflation elevated.

Avoid gold if:
- Vietnam's trade surplus rebounds sharply due to tariff easing.
- The SBV intervenes aggressively to stabilize the VND.

In a world of uncertainty, gold remains Vietnam's ultimate hedge—a lesson the market has etched in VND.