Vietnam's Gold Market: A Strategic Hedge Against Currency Volatility and Geopolitical Uncertainty

Amid a weakening Vietnamese đồng (VND) and rising geopolitical tensions, Vietnam's gold market has emerged as a resilient investment opportunity. The July 10 dip in gold prices—marking a rare buying window—has reignited interest in physical gold as a hedge against currency devaluation and inflation. For investors, this moment presents a chance to capitalize on structural dynamics while navigating risks tied to macroeconomic shifts and regulatory reforms.

Price Dynamics: A Dip in a Bullish Trend

By July 10, SJC gold bar prices fell to 120.9 million VND per tael (a 0.33% decline), offering a tactical entry point after a 43.5% year-to-date surge. This dip, driven by U.S. fiscal policy uncertainty and a brief dollar rally, contrasted with a broader multi-year upward trajectory. Despite the temporary drop, prices remain elevated compared to global benchmarks, with SJC gold trading at ~3.2 million VND per gram—11% higher than the global spot price of 2.63 million VND/gram.

The VND's gradual depreciation—from 25,121 VND/USD in early July to projected lows of 26,300 VND/USD by Q3 2025—fuels inflation and gold demand. Inflation hit a 16-month high of 3.57% in June, with further rises expected due to U.S. tariffs and debt repayments. For investors, this creates a self-reinforcing cycle: a weaker VND drives higher gold prices, which in turn attract buyers seeking to preserve wealth.

Supply-Demand Factors: Cultural Demand Meets Regulatory Shifts

Vietnam's gold market is underpinned by cultural affinity and state-backed discounts, with 70% of purchases driven by retail demand for wealth preservation. Firms like Saigon Jewelry Co. (SJC) offer gold bars at 10–15% discounts to global prices, making them accessible to middle-income buyers. However, supply constraints—including import restrictions and a state monopoly on gold production—have kept domestic prices elevated.

The State Bank of Vietnam (SBV) is addressing this imbalance through regulatory reforms. Amendments to Decree No. 24/2012, finalized in June 使 the state monopoly on gold imports and production, will allow licensed banks and businesses to compete, potentially narrowing the domestic-international price gap. Initial inspections targeting 92% of the gold market aim to curb smuggling and ensure compliance.

Geopolitical Risks and Currency Volatility: A Dual Catalyst

Vietnam's gold market is uniquely exposed to currency volatility and geopolitical risks. The VND's peg to the dollar, managed within a ±5% trading band, creates uncertainty as the SBV balances export competitiveness with inflation control. Meanwhile, global factors—such as U.S. Federal Reserve policies and conflicts in Ukraine and the Middle East—propel gold's safe-haven appeal.

The widening gap between SJC gold and global benchmarks—~11% as of July 2025—reflects both structural inefficiencies and speculative activities. The SBV attributes this disparity to market manipulation, but geopolitical instability and inflation expectations keep prices elevated.

Investment Strategy: Tactical Allocations and Hedging

For investors, the July 10 dip presents a strategic entry point, with 5–10% portfolio allocations to physical gold recommended. Key considerations include:
1. Buy at dips: The 120.9 million VND/tael price offers a rare low amid a bullish trend.
2. Hedge currency risk: Pair purchases with USD/VND futures contracts to mitigate VND depreciation.
3. Monitor policy changes: The implementation of Decree 24 reforms could reduce price premiums but may also introduce short-term volatility.
4. Long-term hold: A 6–12 month horizon aligns with inflation trends and currency stabilization efforts.

Urban centers like Hanoi and Ho Chi Minh City offer the lowest prices (3.2–3.22 million VND/gram), while rural areas face premiums (up to 3.28 million VND/gram). Investors should prioritize liquidity-rich markets for resale opportunities.

Conclusion: Gold as a Resilient Anchor in Uncertain Times

Vietnam's gold market is at a pivotal juncture. Regulatory reforms, currency weakness, and geopolitical risks position physical gold as a critical hedge against inflation and volatility. While risks—such as sudden tariff adjustments or global interest rate hikes—exist, the structural demand for gold in Vietnam's retail market and the SBV's proactive measures provide a floor for prices.

For investors willing to navigate short-term turbulence, the July 2025 dip offers a compelling entry. By combining disciplined allocations with currency hedges, they can capitalize on Vietnam's gold market as a resilient asset in an uncertain global landscape.

Disclaimer: Past performance does not guarantee future results. Investors should consult financial advisors before making allocation decisions.