Price of gold rises but investment not without risks
A leading investment research firm says the price of gold is on the rise, with predictions bullion could reach US$2,000 an ounce. Chayanee Juengmanon from Morningstar Research Thailand says one exchange-traded fund favoured by most domestic gold mutual funds, recorded net inflows of over $20 billion within the last year, a 30% increase in the value of its assets.
gold shops on Bangkok’s Yaowarat Road are seeing long queues, with most customers coming to sell their gold, according to Hua Seng Heng Chief Executive, Tanarat Pasawongse.
“Thais have become more skilled in gold investment. Some of them have the patience to hold their gold for a profit once the price rises.”
With uncertainty surrounding the global economy, the Bangkok Post reports today that in the Thai market, the price of bullion with a purity of 96.5% is nearing 30,000 baht per 1 baht weight gold. Return on investment in gold sits at around 30% year to date. Gold continues to be viewed as a safe haven for investment in unpredictable times, however, its price is subject to factors such as the ongoing pandemic and political tensions around the world. Should there be any unforeseen changes or events, the price could drop.
Chayanee points out that the price of gold has dropped before in the short-term, coupled with a drop in interest rates and a general decline in the stock market as a result of selling pressure. Since March, the price of gold has been rising as a result of the Covid-19 pandemic, with investors switching to what they see as a safer option, but Chayanee says gold has typically generated lower returns after 36 months than stocks on the S&P 500 index (a listing of 500 large companies on US stock exchanges). She believes investing in gold should be done as a risk management strategy, as opposed to core investment, due to pricing instability.
Thunyalak Surapol from the Kasikorn Research Centre says that any economic recovery in the US could take some time, but monetary stimulus should continue, with the dollar falling further and bullion continuing to rally. Trade in gold online futures has risen to nearly 32,000 daily contracts this year, nearly double the 2019 figure of over 16,000.
Two of Thailand’s largest gold importers and exporters, MTS Gold and Hua Seng Heng, see ongoing growth in their gold savings offerings. Nuttapong Hirunyasiri from MTS Gold says the firm introduced its programme at the beginning of the year, prior to Covid-19 moving from epidemic status to full-blown pandemic. Since then, it has grown significantly, with nearly 10,000 sign-ups over the course of 5 months as it offered gold savings from 150 baht.