Record-High Thai Gold Prices: Factors Influencing the Surge in Demand

All eyes were on China back in September when its local gold premiums hit record levels of above $120 per ounce, but what about other key nations in Asia? During the third quarter of 2023, numerous nations experienced surges in local gold prices as consumer demand rates increased with tightening economic conditions and geopolitical tensions. Thailand joined this grouping just a few weeks back when its local gold prices broke the previous record.

On October 19, local prices for gold in Thailand spiked, reaching a record high of 34,100 baht per baht weight (equivalent to 15.244 grams or 0.4901 ounces). This increase represented a 300 baht increase just from the previous trading day. According to the Gold Traders Association, Thailand’s new record can be attributed to the tensions in the Middle East surging safe-haven buying.

“More than anything, it’s uncertainty [driving the price up],” Sandra Close, a gold industry consultant at Surbiton Associates, explained when discussing gold’s recent performance rates. “The sad and difficult situation in the Middle East at the moment … and the uncertainty of that is really, I think, moving the market at the moment.”

International gold prices launched from three-month lows on October 7, when the Hamas attack on Israel occurred. Since then, gold futures increased from the almost yearly low of $1,831.80 per ounce to $2,005.60 per ounce on October 30. Traders around the globe across all markets have spent the last month flocking to the safe-haven asset in fear of a potential large-scale war sparking from the Israel-Palestine conflict.

The Gold Traders Association announced on October 19 that the sale price for domestic gold jewelry at 96.5% purity in Thailand reached 34,100 baht per baht weight, on par with spot gold’s international price of $1,949 per ounce at the time.

The domestic buying price for gold in Thailand continued to surge throughout October as tensions heightened in the Middle East, reaching 32,897.20 baht per baht weight. Gold bar pricing also spiked, reaching 33,600 baht per baht weight.

“The domestic gold price continued to rise from a record of 33,800 baht on Oct 18 to 34,100 baht on Oct 19, the highest in history. This is a result of the market’s concern over the war in the Middle East escalating, with gold prices increasing rapidly over the past two days,” Gold Traders Association president Jitti Tangsithpakdi explained, according to an article by the Bangkok Post.

With that being said, Tangsithpakdi believes war anxiety could reduce extravagant purchases. Essentially, retail gold demand could diminish while investor demand rates soar. Nations like Thailand typically experience high gold-buying rates from retail buyers near the end of the year as the festive season rolls around, though the Middle East conflicts could dampen this.

“However, if the Israel-Hamas fighting continues, it might affect purchasing power for the rest of the year and during the New Year, which is normally the best season for gold shops,” Tangsithpakdi explained.

Despite this concern, investor demand continues to rise sharply in Thailand, especially as the Israel-Palestine war worsens. According to Hua Seng Heng, a local gold trader in Thailand, gold prices have increased in line with each event happening in the Middle East, so it makes sense that performance rates would continue improving as conditions diminish.

For example, on October 17, a deadly explosion tore through the Al-Ahli Baptist Hospital in Gaza. Just a couple of days later, on October 19, gold prices in Thailand soared to 34,100 baht per baht weight.

Now that international gold prices have surpassed the key resistance level of $1,950 per ounce, Hua Seng Heng expects the precious metal to maintain an upward trend. In general, Hua Seng Heng advises traders to monitor the situation in the Middle East as well as U.S. interest rates to assess how the precious metal may perform in the short term.

High interest rates increase the opportunity costs of investing in non-yielding assets like gold, so once the U.S. Federal Reserve begins cutting rates, gold may enjoy an extra performance boost from the investor demand sector. According to CME’s FedWatch Tool, the current odds of a rate pause in December are 85.5%, with the first solid chance of a rate cut coming in March at just over 12%.

Hua Seng Heng places international resistance levels for gold at $1,962 to $1,980 per ounce, with the support barriers at $1,930 to $1,920 per ounce.

As always, investors should consult their financial advisors before making any portfolio decisions.

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