Savers nationwide are flocking to gold shops, enticed by the falling price of the precious metal, which yesterday tumbled to a 34-month low amid fears of an end to the US quantitative easing policy.
Gold bar fell below Bt18,000 per baht weight for the first time since April 2010.
Wisawa Wisawachaiwat, the owner of Jongluck Gold Shop in Phitsanulok, said the recent plunge had sparked new interest among small savers. “The prices have fallen to the lowest in years and they are expecting huge profits once the prices climb up again,” he said. Some clients took home gold bars worth 50-100 in baht weight.
The precious metal yesterday extended the decline to a 34-month low amid speculation that the US Federal Reserve will reduce stimulus with economic data beating estimates. Held as a safe bet against inflation, gold lost value as unprecedented money printing by central banks around the world failed to spur inflation.
A lack of accelerating inflation and concerns about the strength of the global economy is also hurting silver, platinum and palladium, which are used more in industry.
Bullion has slid 28 per cent this year, set for the biggest annual drop since 1981, after rallying for the past 12 years. About US$62.4 billion was wiped off the value of precious metals exchange-traded product holdings this year as some investors lost faith in them as a store of value.
While gold bullion slid to $1,180.50 an ounce early yesterday in Singapore, the lowest since August 2010, gold prices in Thailand followed the move. Local gold prices were adjusted 15 times yesterday in line with global volatility. At 5pm, gold bar was sold at Bt17,850 while ornaments were at Bt18,250 per baht weight.
Local gold price averaged Bt17,493.18 in April, 2010, when global prices averaged $1,145.72 per ounce and when the baht was at 32.29 to the US dollar.
Jitti Tangsitpakdi, president of Gold Traders’ Association of Thailand, believed that gold prices could decline further but would not fall below $1,100 per ounce. Cheap prices should spur new demand and the local prices could be cheaper if the baht does not weaken further against the US dollar.
Christin Tuxen, a senior analyst at Danske Bank in Copenhagen, who sees gold at $1,000 in three months, said: “The current environment is a fundamentally poisonous one for the yellow metal. Rising yields are upping the opportunity cost of holding gold, the initiation of a fundamental dollar up-trend weighs, inflation expectations are in decline as the commodities super-cycle wears off, and many tail risks have been sidelined.”
Investors sold 583.2 tonnes of gold this year.
“There’re still people who are interested in gold but because prices have fallen so much and so rapidly, they’ll wait for some stabilisation,” said Alexandra Knight, an economist at National Australia Bank. “There’s definitely been a loss of confidence in gold and that’s seen in the ETF liquidations.”