The FT revealed in March how Vietnamese banks and gold trading houses had sent billions of dollars of high-grade gold jewellery to be smelted in Switzerland in the last two years to circumvent government restrictions on bullion exports.

The collapse of this lucrative arbitrage trade helped the Swiss notch up a record monthly trade surplus of SFr 3.3 billion ($3.9 billion) in May.

In May 2010, Switzerland imported 21 tonnes of gold jewellery from Vietnam, at a value of SFr921 million, as banks and gold traders desperate for dollars took advantage of the fact that gold was trading in Vietnam at a discount to the world price. This May, imports shrank to just 813 kilograms, valued at SFr34 million.

Vietnam is one of the world's biggest per capita consumers of gold, which is seen by many families as an inflation-proof store of value. Switzerland dominates the global gold refining industry, turning jewellery and other ornaments into standard bullion.

In recent years, gold in Vietnam has tended to trade at a premium to the world price because of import restrictions designed to stem the flow of money out of the Vietnamese currency, the dong.

The sale of gold jewellery to Switzerland has spiked on the rare occasions when the onshore gold price has been lower than the international price. This was the case until last October, when onshore gold prices started rising again as inflation gathered pace.

Vietnam's government announced plans to restrict the gold market in February. Since then, gold has again traded at a discount to global prices but shipments to Switzerland, while rising sharply month-on-month in April and May, have remained a tiny fraction of what they were last year.

Nevertheless, the government moved to stem the outflow and brought in an export tax of 10 percent on jewellery over 99 percent purity at the start of the year But given the government's poor track record on implementing customs measures, gold traders believe other market factors are more likely to be behind the drop in exports.

Last year Vietnam exported nearly 61 tonnes of gold jewellery to Switzerland at a value of SFr2.6bn, and traders reckon this amounts to all that was readily available for export at banks and their associated gold trading houses.

But this year discounts in the local gold price have been far smaller, traders say, meaning there is far less incentive to sell gold offshore.

In any case, Vietnam's gold market remains in a state of flux as the government has yet to detail the restrictions announced in February.

As part of a package of measures designed to stabilise the economy, it said initially that it would prevent people from buying gold bars. But the latest draft of new regulations, released to the state-owned press, suggest that the government will maintain the status quo while trying to step up licensing of gold shops.

"This is only a draft, not the final version, so I'm not too bothered," said one gold trader. "The government changes the rules all the time but, whatever happens, the market will carry on regardless."

Vietnam is a gold-consuming nation and any attempts to restrict the trade will be counter-productive, added another trader. "It will simply drive more business into the unregulated, black market," he said.

By Ben Bland - The Financial Times - June 24, 2011