Gold Investment Trends - Thailand

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Gold Investment Trends - Thailand

Gold investment trends in Thailand are the increased attractiveness of the metal to institutional investors, higher prices due to increased demand, and a domestic sell-off by Thai citizens as they take advantage of higher prices during the economic downturn. The trends are explored in greater detail in the attached brief, with supporting data from newspapers and business publications, as well as the Gold Traders Association and its members.

Gold's Increased Attractiveness as a Safe Haven Asset for Institutional Investors.

What is the trend?

  • During times of market turmoil, assets that retain or increase in value are classed as safe haven assets. This type of asset is attractive to investors as it allows the investor to hedge against loss during market downturns. Examples of safe haven assets according to JP Morgan are bonds, infrastructure, core private real estate, and gold. Gold has remained a stable asset in disparate economic and market environments.
  • The internal economic downturn, combined with external pressures and uncertainties such as geopolitical (US-China tensions), global health (COVID-19), and economic (a global downturn due to contact restrictions) concerns, have combined to increase the attractiveness of gold as a safe haven asset for institutional investors in Thailand.

Why is this a trend?

  • Thailand's major export markets are the United States, China, the European Union, and Japan, economies that are all reeling from the effects of COVID-19. Economic growth for Thailand in 2021 is in part, contingent, on economic recovery in its export markets stimulating domestic manufacturing and inbound tourism demand.
  • In June 2020, an analyst at YLG Bullion International advised investors to buy and sell gold when the price moved between prescribed bands of $1,712 and $1,717 to buy, and $1,735 and $1,737 to sell. As investors moved further into gold as a safe haven asset, the price per ounce climbed to over $2,000 an ounce
  • In Thailand, responding to low returns from its low-risk assets, the Government Pension Fund, invested in gold as a "hedge against inflation and capture capital gains." This investment is a short term strategy for the Fund.

Industry Perspectives

  • Chairman of the Gold Traders Association and owner of Chin Hua Heng Goldsmith, Jitti Tangsithpakdi, believes that gold will retain its attractiveness as a safe haven asset for as long as the economic downturn continues.
  • Chairman of MTS Gold, Kritcharat Hirunyasiri, noted that this trend is supported by uncertainties regarding COVID-19 and the success of the vaccine.


Higher Prices for Gold

What is the trend?

  • Globally, with investors purchasing gold in higher quantities on the advice of industry analysts, the price per ounce climbed to record highs reaching $1,944.71 in July 2020 breaking the previous price record set in 2011, and crossing the $2,000 mark just a month later in August 2020.

Why is this a trend?

  • On 20 January 2020, the price of gold in Thailand was ฿47,354. By 19 January 2021, the price was ฿55,118. The highest price during 2020 was ฿64,165.
  • On 20 January 2020, the price of gold in Thailand was ฿47,354. By 19 January 2021, the price was ฿55,118. The highest price during 2020 was ฿64,165.

Industry Perspectives

  • In its January 2021 report, the Gold Traders Association reported that a majority of gold traders and derivatives brokerage operators expects the price of gold t increase in January 2021.
  • The Association forecasts the price of gold internationally to range between USD $1,799 and $1,975 in January 2021. Domestic prices for bullion with 96.5% purity is expected to range between ฿25,900 and ฿28,000 per 1 baht weight of gold.
  • Tipa Nawawattanasub of YLG Bullion and Futures expects short term fluctuations in the price of gold due to large investors selling of the asset, within a wider context of long term increases on account of geopolitical conflict, global monetary policy easing, and low interest rates.


Increased Domestic Supply

What is the trend?

  • Similar to other countries in Asia like India, in Thailand, gold is seen as a premium asset that is within reach of everyday citizens. The metal is also popular for jewelry ornaments, and for gifting.
  • Encouraged by high prices, and secure in the knowledge that traders are bound by tradition to a price set by the Gold Trader's association, Thai citizens have resorted to selling their gold to meet everyday expenses during the economic downturn wrought by COVID-19.

Why is this a trend?

  • The impact of the economic slowdown in Thailand has seen a reduction in incomes, especially for small and medium enterprises (SMEs) susceptible to a liquidity crunch in the medium to long term. With over 90% of non-agriculture and non-public sector employees in Thailand employed by SMEs, and a 10% decline in working hours for the Thai labor force, citizens resorted to selling their gold to meet expenses.
  • In July 2020, customers were selling up to ฿10 million in gold per day at Hua Seng Heng, with up to 90% of customers in stores being sellers.
  • At the onset of the pandemic, the volume of sales of gold by Thai's led to gold shops not being able to pay sellers immediately as they faced a liquidity crunch.

Industry Perspective

  • The CEO of Thailand's largest gold trader, Tanarat Pasawongse of Hua Seng Heng expects that Thai household will continue to sell their gold for as long as the price remains high.
  • In April 2020, Jitti Tangsithpakdo, president of the Gold Traders Association, commenting that this was the first time in 60 years in the gold trading business that he saw so many persons selling gold, advised Thai's not to sell all their gold at once since prices may continue to increase and because of uncertainties related to the end of the COVID-19 pandemic.

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