All public gold trading floors will be banned effective March 31, 2010, under a recent order by Prime Minister Nguyen Tan Dung.

The order requires all gold trading floors to be shut down and all domestic investor accounts terminated by that date, after which time the State Bank of Vietnam will assume oversight of all trades in the precious metal.

The order also requires the central bank to suspend all 2006 regulations allowing gold trading via accounts abroad.

Jewellery businesses will still be allowed to sell gold jewellery, but the State Bank will draft new regulations limiting how gold can be traded in this form.

After over two years of unregulated trading in gold, the Government has decided to clamp down on what has become a chaotic market driven by speculative behaviour. Gold trading is also undercutting official efforts to regulate monetary policy and stabilise the economy.

"The shutdown is necessary, but had it come sooner in 2008, the costs could have been reduced," said a representative of the Vietnam Association of Financial Investors (VAFI). "Many trading centres have been set up, taking a large investment of capital to build up staff and infrastructure."

Investors would lose an investment channel, but the State would have one less factor to regulate, said Nguyen Thanh Toai, deputy director of Asia Commercial Bank, the nation’s first credit institution to establish a gold trading floor in Viet Nam.

Black-market gold trading in the past had rattled the authorities, Toai said, which is why they moved the illegal gold trading from the dark alleys into the light of lawful gold trading centres in which it could be monitored and regulated. But now, he said, they were returning it again to the darkness.

Another director of a HCM City based gold trading centre, who asked to remain anonymous, worried that investors might now illegally set up accounts abroad to trade gold online as they used to do before gold trading centres were set up in Viet Nam, causing more dollars to drain out of the domestic economy.

The State Bank of Vietnam had submitted to the Government two proposals for better managing gold trading centres, including closing them down or raising required security deposit rates to 100 per cent.

The resulting shutdown order will affect about 20 gold trading bourses.

There are centres operated by banks, requiring investors to open accounts at the bank; bourses set up by credit institutions or securities companies, requiring investors to deposit money directly with the organisation operating the bourse; and centres allowing institutions and investors to trade gold for gold abroad using US dollars./.