Gold sales soar as price dips below Bt20,000 per baht weight

Local gold has been sold below Bt20,000 per baht weight for the first time since 2011, following a sharp fall in global prices over the past few days.

Bullion for immediate delivery was at US$1,379.50 (Bt39,770) an ounce at one point in London trading, while gold fell to a two-year low of $1,321.95 an ounce yesterday on growing optimism that an economic recovery - particularly in the US - will curb demand for the precious metal as a protection of wealth. The price of gold bullion has lost 18 per cent so far this year, after rising six-fold in a 12-year rally through last year.

In an interview with Bloomberg TV, Cypriot Finance Minister Haris Georgiades confirmed yesterday that the Cyprus government planned to sell part of its gold reserves within the next few months.

Sales of assets and gold are a way to raise revenue in order to unlock the €10-billion (Bt380 billion) European Union bail-out package for the ailing island-state.

Thai gold prices were adjusted eight times yesterday for an aggregate cut of Bt2,400 per baht weight to Bt18,950, as business resumed after the long Songkran holiday period.

people buying up

The falling prices drew heavy traffic to Yaowarat gold shops. As some shops remained closed, others were crowded and inventory, particularly that of bullion, ran out.

Hua Seng Heng, the oldest gold shop in Chinatown, had to issue coupons to clients, urging them to pick up their purchases on April 24.

As gold and silver prices changed more than 10 per cent, the Thailand Futures Exchange temporarily halted trading in order to help investors digest news.

Deputy Prime Minister and Finance Minister Kittiratt Na-Ranong, trying to calm the nervousness, said the dip would be short-term as gold remained an asset with relatively high security. Gold-price speculation is normal, he added.

Mathee Supapongse, Bank of Thailand's senior director at the Macroeconomic and Monetary Policy Department, said sliding prices had no impact on the growth forecast, as gold prices had not been taken into account in forecasting the economic outlook.

"Gold was set up for having a proper correction," Jim Rogers, chairman of investment company Rogers Holdings, said on Bloomberg TV. "This may be the proper correction and, if so, then it will make a bottom and we can all buy gold again because it is going to be much higher over the decade."

During March and April, many researchers revised down their gold-price forecasts for this year. Goldman Sachs, for example, cut its forecast for the precious metal to $1,545 an ounce from the $1,610 it predicted earlier.

"Given gold's recent lacklustre price action, and our economists' expectation that the acceleration in US growth later this year to above-trend pace will support US real rates, we are lowering our dollar-denominated gold-price forecast once again," said the US investment bank. "While higher inflation may be the catalyst for the next gold cycle, this is likely several years away."

France's Societe Generale has also lowered its gold outlook for 2013, to $1,500, while Nomura has cut its forecast from $1,981 to $1,602.

"For the first time since 2008, the investment environment for gold is deteriorating as economic recovery, rising interest rates and still-benign Western inflation [for now] will leave some investors rethinking their cumulative $240-billion investment in gold over the past four years," said the Japanese institution.

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