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According to figures
recently released by the International Monetary Fund, Thailand seems to have taken
advantage of the recent correction and consolidation in the gold price to
continue its long-term gold buying programme.
Having already made three significant purchases in the last year, the Thai
government added another 500,000 ounces of gold to its reserves in September,
raising its total gold reserves to 4.9 million ounces.
Fox Business
reported that demand is likely to grow in Thailand, an emerging export market, as it
seeks to diversify its growing foreign exchange reserves and mitigate risk
against the backdrop of rising US and European debt concerns. The Thai people
have followed suit, taking part in their own gold rush.
For decades, gold played a
significant monetary role in the Western world, but Thailand’s trust in
the precious metal, like some of its Asian counterparts, is not limited to
its central bank. Gold is deeply grounded in Thai culture, commonly given as
high-value gifts to friends and family, and many Thais, regardless of income
level, routinely allocate a large portion of their savings into gold jewelry,
coins, and bars. Thailand’s former name, Siam, even means
“gold” in Sanskrit. Old traditions die hard, and despite recent
price volatility, the trade is flourishing.
While the Bank of Thailand is
buying gold as a safe haven, could the same shrewdness explain the nature of
local demand, or are the Thai people acting purely out of tradition? The question
was taken to Yaowarat Road, in the heart of
Bangkok’s Chinatown, the centre for the gold
industry. The “Golden Road,” it is often called, boasts over 130
gold shops, selling necklaces, bracelets, rings, coins, and bars.
Every shop in Thailand is required
under the Thailand Consumer Protection Law to label all gold for sale by
price and weight. Thais use a unique unit of measurement for weighing gold
called “Baht,” not to be confused with the Thai currency of the
same name, which equals 15.244 grams of 96.5% pure gold. Buying and selling
prices are set by Thailand's
Gold Trader’s Association, changing only several times a day, seeking to
create uniformity in a similar manner to the London gold fix. The shops then
invariably change display prices as they are announced.
The buying price for all gold
shops is often 100 baht less than the selling price. So, if today’s
gold price is 25,500 baht per Baht, or 15.244 grams, the selling price of
25,400 baht would be displayed on every shop window. This established system
for the gold trade is convenient for some, but strange to many that seek out
the shops with the lowest premiums.
A tycoon shop, Hua Seng Heng
Goldsmith, one of the oldest and most respected gold shops on Yaowarat, was founded by a Chinese immigrant in the late
1800s. “I estimate that about one-third of our customers buy gold as an
investment, because they have seen the price go up in the last ten
years,” said Yong Susarak, a gold merchant at
Hua Seng Heng. According to Mr. Susarak,
many of his customers buy gold in the form of jewelry, for aesthetic appeal,
and some even for luck. “But almost all of our customers, poor and
rich, understand that gold has value that no one else can take from you. This
is common sense.”
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