2024: The year of gold frenzy in Thailand

Gold prices witnessed a sharp spike in 2024, captivating both local and global markets. Spot gold this year, according to news agency Reuters, surged 28 per cent to $2,615.99 per ounce as of December 27.

In Thailand, consumers and investors paid greater attention to the rapidly rising price and a high-profile public fraud involving two groups of gold dealers who tried to cash in on the gold fever.

Around 1,000 people fell victim with damage estimated at several million baht. Police went after the perpetrators in September and October, arresting gold dealers suspected of committing public fraud.

“Several factors have contributed to this unprecedented rise in the price of gold, including geopolitical tensions and central bank purchases,” says Anusorn Tamajai, dean of the University of the Thai Chamber of Commerce’s Economics Faculty, while other analysts cite a shift towards dedollarization.

Geopolitical tensions

Geopolitical tensions have always played a major role in influencing gold prices.

In 2024, escalating conflicts in various parts of the world have heightened global uncertainty, driving investors towards safe-haven assets like gold.

Ongoing trade disputes, territorial conflicts, and political instability in key regions have pushed up the demand for gold as a reliable store of value.

Central banks loading up

Central banks around the world have been increasing their gold reserves, further fueling the rise in gold prices.

In 2024, several central banks, including those of emerging economies, made substantial purchases of the precious metal to diversify their reserves and reduce dependence on the US dollar.

The World Gold Council reported that central banks bought a combined 483 tonnes of gold in the first six months of 2024, a record for the first half of the year.

The Bank of Thailand ranked 20th among central banks with the highest gold reserves as of the third quarter of the year with 234.52 tonnes. This trend has contributed to the upward pressure on gold prices, as demand from the central bank remains a crucial factor in the market.

Dedollarization

The global shift towards dedollarization has also played a significant role in the gold frenzy of 2024.

Many countries, especially those sanctioned by the US and its Western allies, seeking to reduce their reliance on the US dollar have turned to gold as an alternative asset, while investors are worried about the US public debt ballooning to $36 trillion, or about 99 per cent of GDP.

This trend has been driven by concerns over the dollar's stability and the desire for greater financial sovereignty.

As a result, the demand for gold has surged, pushing prices higher.

Gold vs Thai stocks, bitcoin

While the Thai stock market has continued to perform poorly, it cannot match the allure of gold as a safe-haven asset.

Gold's intrinsic value and historical significance make it a preferred choice for investors during times of economic uncertainty.

In 2024, the volatility in the stock market, coupled with global economic challenges, led many Thai investors to shift their focus towards gold for its stability and potential for capital preservation.

Bitcoin, often referred to as digital gold, has gained popularity as an alternative investment in Thailand. However, gold continues to hold a unique position in the market.

Unlike bitcoin, gold has a tangible value and a long history as a store of wealth.

Gold's established track record and universal acceptance further enhance its appeal compared to the relatively nascent and volatile nature of bitcoin.

The strong bull run this year has drawn new investors to the market, which has increased demand and pushed up the price.

Cultural significance in Thai society

Gold holds a special place in Thai society, transcending its role as an investment asset. It is deeply ingrained in the cultural fabric and serves various purposes.

Gold jewellery is highly prized in Thai culture and is often worn during special occasions and ceremonies. It is seen as a symbol of wealth, status and prosperity.

The intricate craftsmanship and traditional designs make Thai gold jewellery highly sought after both domestically and internationally.

Gold has also been regarded as a reliable investment and a store of wealth in Thai society.

Many Thais consider gold as a means to preserve and grow their assets over time. The cultural inclination towards gold has been passed down through generations, making it a preferred choice for long-term savings and financial security.

Soraphol Tulayasathien, senior executive vice president at the Stock Exchange of Thailand (SET), said gold futures financial products are also popular among Thai investors as they require less money than investing in a gold bar. The trade is protected from frauds, as it is supervised by the Thailand Futures Exchange, a subsidiary of the SET.

Impact on exchange rate and foreign trade

The surge in gold prices has had a significant impact on the exchange rate of the baht and Thailand's foreign trade.

Thailand’s export of gold surged 434.1 per cent year on year in July, driving the country’s export growth to 15.2 per cent.

Excluding gold, exports grew 11 per cent. Nowadays, more than 90 per cent of gold trade involving gold bars is for investment and speculative purposes while trading in gold jewellery has been worth less than 10 per cent, according to the Commerce Ministry.

Turbulence in the price of gold often causes the baht’s exchange rate to move differently from peer currencies in the region due to the high volume of gold trade.

Outlook for the year ahead

In 2024, gold prices have seen a substantial rise both locally and globally. The domestic price of gold bars hit between 42,250-42,350 baht per baht weight (15.244 grams) as of December 28, up sharply from the range of 33,550 to 33,650 per baht weight on January 1, according to the Gold Traders Association.

This increase has been driven by the aforementioned factors, as well as a growing demand for gold as a hedge against inflation and economic uncertainty.

Looking ahead to 2025, the outlook for gold prices remains positive, due to continuing geopolitical tensions and central bank purchases, according to many local and international analysts.