The trend toward gold is spilling into other financial areas

Of the hundreds of "inflation" stories I've heard of in the past year, the most incredible is the one coming out of Vietnam...

Vietnam is experiencing every problem that causes a rush into precious metals... inflation is an incredible 27%, interest rates are over 8%, the stock market was down every day in May, and unemployment has more than doubled (from 2% in '07 to 5.1% this year). Household wealth is drastically declining.

Now here's the interesting part: How are the Vietnamese people reacting to all of this? Did they buy stocks? Real estate? Maybe inflation-protected securities? Or did they just sit on cash?
None of the above.

Vietnam's economic and monetary problems have sent its people fleeing to gold. Not gold stocks... but physical gold bullion. They're hoarding it and hiding it from their government. Hard figures on the size of the local gold trade aren't available, but current estimates are that the public owns 16 million ounces, including 1.3 million ounces imported in the first quarter of 2008. Of this, only about 10% has been deposited into banks (which actually pay 2.5% interest on gold). The remaining 90% is likely under mattresses or hanging around the owner's neck.

The trend toward gold is spilling into other financial areas. After a long period of quoting land prices in Vietnamese dong (the nation's currency), landlords are now setting prices in gold in order to avoid the devaluation. Nguyen Trung Vu, general director of the Ky Moi Real Estate Co, said that while it is complicated, "I think that making transactions with payment in gold will become a trend."