Federal Reserve statements impact gold prices, Thai domestic rates soar

Gold prices have been impacted by recent statements from the Federal Reserve, indicating possible rate increases this year and a likelihood of high rates throughout next year. This information, released on Wednesday, elevated the US dollar and bond yields, putting pressure on gold as investors revised their future price expectations for the precious metal. Consequently, Thursday saw a retreat in gold prices, with spot gold declining 0.1% to US$1,927.84 per ounce and US gold futures falling 1% to $1,948.10.

The Federal Reserve also dismissed concerns about a potential US recession, which in turn reduced the demand for safe-haven assets like gold. Despite international fluctuations, domestic gold prices in Thailand soared to a record high of 33,550 baht on September 20, largely driven by a depreciation of the baht, which has weakened by 11% this year.

Gold Traders Association data reveals the domestic gold price has risen from 29,000 baht at the start of the year to a record 33,550 baht per baht weight on Wednesday, following the currency’s plunge to 36.28 baht to the dollar.

Gold price predictions from MTS Gold Futures suggest a resistance level of US$1,945 to US$1,950 an ounce and an upward trend for domestic gold prices as the baht is expected to depreciate further. However, Pawan Nawawattanasub, CEO of YLG Bullion International, believes this trend may be short-lived due to government efforts to stimulate the tourism sector, which may lead to an appreciation of the Thai currency.

The World Gold Council (WGC) states that gold has remained robust over the past few years, despite a strong dollar and surging US interest rates.

John Reade, WGC’s Chief Market Strategist, projects gold prices could reach US$2,050 per ounce post the Fed’s interest rate hike cycle, likely to conclude next year. He adds that a US recession could also influence gold prices. Pawan Nawawattanasub is more bullish, expecting gold prices to surge from US$2,075 to US$2,100.

Gold consumption

She also sees long-term opportunities for an increase in the gold price, projecting Thailand’s gold consumption over the next three to four years to be up to 100 tonnes per year. The record consumption level was 154 tonnes in 2013, and on average, Thailand consumes 63 tonnes of gold per year, ranking third in Asia behind China and India, and seventh globally, reported Bangkok Post.

Online gold trading is increasing in Thailand, supported by real-time, readily available information. This trend is expected to continue, driving the domestic gold market upward, according to Pawan.

Sirapat Kaoteera from Krungsri the Coach advises that investing in gold can counteract inflation, adding that gold maintains value even during times of conflict and is recommended as a portfolio diversifier.

Gold investment options include gold bars, gold futures, and mutual funds, with online purchasing available via brokers, traders, or investment platforms managed by asset management firms. Sirapat Kaoteera also highlights that many countries hold significant gold reserves to combat inflation and crises, further encouraging investment in gold.

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