Thailand’s gold prices drop like a rock, baht’s the culprit

Gold prices in Thailand have taken a nosedive, plummeting by 2,000 baht per baht weight in just over a month. This dramatic drop is attributed to the Thai baht’s impressive 7% rise during the same period. The Gold Traders Association (GTA) warns that prices could fall further if the baht continues to strengthen.

Jitti Tangsithpakdi, President of the GTA, explained that while global gold prices hover around US$2,520 per ounce, domestic prices have been heading in the opposite direction.

“The domestic price dropped as the baht strengthened since the end of July. The baht has appreciated rapidly by about 7%, affecting the domestic gold price, which is why it does not align with world gold price increases.”

The association reported that the price of gold per baht weight domestically fell by 100 baht to 40,050 baht.

Jitti also indicated that a 1-baht appreciation against the US dollar impacts the domestic gold price by approximately 3,000 baht. He pointed out that if economic indicators in the US remain weak, the Federal Reserve might opt for significant interest rate cuts. This would depreciate the dollar, strengthen the baht, and consequently lower domestic gold prices.

Investors are advised to consider accumulating gold while the domestic prices are low, ahead of the Federal Reserve’s meeting scheduled for later this month, Jitti suggested.

Local trader Hua Seng Heng’s analysis found that the global gold price has increased due to the weakening of the US dollar and a decline in US government bond yields.

The dollar’s depreciation followed the release of Automatic Data Processing’s private sector employment data for August, which was lower than market expectations, hitting a low not seen since January 2021. Another contributing factor, according to Hua Seng Heng, is Russia’s plan to purchase foreign currencies and gold worth more than US$1.98 billion.

The trader anticipates a global gold price increase if the Federal Reserve decides to cut interest rates by 25 to 50 basis points to 4.75-5.00% at its meeting on September 18.