The US Federal Reserve’s unambiguous warning this week that another rate hike is conceivable this year and that rates would likely remain high until 2024 impacted not only stock markets and currencies but also gold prices.
Last Wednesday, the domestic gold price reached a record high of 33,550 baht per baht weight as the local currency fell to 36.28 baht to the dollar.
The Fed statement on Wednesday caused the US dollar and bond yields to climb, putting more pressure on gold as investors reduced their price expectations for the precious metal in the coming months. As a result, gold prices fell 0.1% on Thursday, with spot gold falling to $1,927.84 per ounce. Gold futures in the United States fell 1% to $1,948.10.
A day earlier, bullion hit its highest level since September 1 before the Fed raised its US GDP outlook and made the “higher for longer” rate comment. The Fed also dismissed the possibility of the US economy entering a recession, which would reduce demand for safe-haven assets such as gold.
On September 20, the local gold price reached a record high of 33,550 baht, with baht devaluation being the primary driver. The baht has lost 11% of its value this year.
The domestic gold price rose from 29,000 baht at the start of the year to a record of 33,550 baht per baht weight on Wednesday, when the currency fell to 36.28 baht to the dollar, according to the Gold Traders Association.
Gold Prices Rising
According to MTS Gold Futures, the worldwide gold price will face major resistance between $1,945 and $1,950 per ounce. The domestic gold price is also rising as the baht continues to fall.
According to Pawan Nawawattanasub, CEO of YLG Bullion International, the weak baht supports the domestic gold market, but this is predicted to be short-lived.
“The government’s tourism stimulus package, including free visas for Chinese tourists, should boost demand for the baht.” “Thai currency will appreciate as a result of this,” she predicted.
According to the World Gold Council (WGC), gold has held up well in recent years despite a strong dollar and rising real US interest rates.
WGC senior market strategist John Reade believes gold prices will rise to $2,050 per ounce once the Fed completes its rate hike cycle, which is expected next year.
According to Mr. Reade, another factor that could influence gold prices is whether the United States is in a recession.
Ms Pawan of YLG is more positive, forecasting a spike in gold prices to $2,075-2,100. She believes that the gold price has the potential to rise in the long run. Ms. Pawan estimates that Thailand will consume up to 100 tonnes of gold annually during the next three to four years.
In 2013, the highest consumption level was 154 tonnes. On average, Thailand consumes 63 tonnes of gold annually, ranking third in Asia behind China and India and seventh globally.
Investing in gold can beat inflation
The increasing number of Thais purchasing and selling gold online as an investment is one factor encouraging higher gold consumption. Accessible, real-time information is available online at any moment. According to Ms Pawan, this channel will likely increase the domestic gold market.
If investors wonder why they should invest in gold, Sirapat Kaoteera of Krungsri the Coach, a private financial advising business, believes it can fight inflation.
“If we look back at gold prices over the years, it was 4,850 baht a decade ago, implying that gold investment provided a 19.4% return.” That is quite high compared to bank fixed deposit interest rates, which range from 0.5 to 1.5% each year,” he explained.
“Investing in gold can beat inflation and is considered a safe-haven asset because its value does not fall, even during times of war.” To diversify your investing risks, keep some gold in your asset portfolio.”
Gold prices change less than other risky assets, according to Mr Sirapat.
He claims that whereas cryptocurrency can lower your principal by a double-digit percentage in a single day, gold will not.
Gold investment is offered in various forms, including gold bars, futures, and mutual funds.
In addition to physical purchases, users can buy gold online through brokers, traders, or investment platforms operated by asset management firms.
According to Mr Sirapat, most governments maintain considerable amounts of gold as a reserve fund to combat inflation or when confronting a crisis, which is one reason why people choose to invest in gold.