Bangkok: The price of gold in Thailand has hit a new record, reaching 55,600 baht per baht weight, aligning with global gold price trends. SCB FM has indicated that there is potential for further increases in gold prices. In the short term, the baht may weaken, but it is expected to strengthen in the long term due to declining confidence in US assets.
According to Thai News Agency, the Gold Traders Association reported that the gold price fluctuated 36 times today, closing with gold bars priced at 54,450 baht per baht and gold ornaments at 55,250 baht. During the trading session, gold bars reached a record high of 54,800 baht, while gold ornaments hit 55,600 baht, influenced by a GOLD SPOT price of $3,496.50 per ounce and an exchange rate of 33.12 baht per dollar. Global gold prices have surged amid trade war fears, and the baht has appreciated as the US dollar weakens. If the baht does not strengthen, gold prices may continue to rise.
Mr. Wachirawat Banchuen, Senior Financial Market Strategist at SCB Financial Markets, revealed that the recent rapid appreciation of the baht is not due to Thailand's economic improvement but rather to weakening US factors affecting the dollar. The baht's faster appreciation compared to other regional currencies has led to a continuous rise in the baht index. In the short term, the baht may weaken again due to potential US tariff hikes and a slowing Thai economy, prompting possible interest rate cuts by the Monetary Policy Committee in the second quarter. It is anticipated that Asian central banks might allow their currencies to depreciate against the US dollar to mitigate tariff impacts.
In the long term, the baht is expected to strengthen as the dollar weakens due to reduced confidence in US assets, while other major currencies gain strength. High gold prices are also anticipated to bolster the baht. Mr. Wachirawat noted that the baht's fluctuations have been significant, initially weakening to near 35.00 per dollar following tariff announcements, but strengthening to near 33.00 per dollar after tariff postponements. This rapid appreciation is attributed to external factors leading to a weakening US dollar index, as the market perceives greater US impact from import tariffs compared to other major economies, potentially reducing confidence in US assets.
Market concerns about Jerome Powell's potential removal as Chairman of the US Federal Reserve have led to accelerated sell-offs of US assets, decreasing stock market indices, rising Treasury yields, and a weakening dollar index. In the short term, the baht might weaken within the range of 33.50-34.50 per US dollar. However, it could strengthen in the long term, ranging between 32.50-33.50 per US dollar by year-end, influenced by a weakening dollar index. If the US economy weakens without reaching recession, and inflation rises slightly, the Fed may cut interest rates three times this year, starting mid-year. SCB FM anticipates this will weaken the US dollar index against currencies including the baht, with capital likely flowing out of the US into European stock markets and the EM Asia bond market. Major currencies such as the Euro and Yen are expected to strengthen, supported by government stimulus measures and interest rate hikes, respectively.
The rising demand for gold as a safe asset continues to drive its price to record highs, currently around $3,500 per ounce. SCB FM suggests further increases are possible due to trade tensions causing financial market turmoil and undermining confidence in dollar-denominated assets. There has been a continuous inflow into gold-backed ETFs and central banks' gold purchases, supporting gold prices and potentially strengthening the baht further.
There are risk factors that might cause the baht to deviate from these predictions, such as ongoing trade wars or Jerome Powell's dismissal. Failure to reach a trade agreement with the US by July could decrease confidence, while domestic factors could further pressure the baht in the second half of the year, potentially weakening it to 35.00-36.00 per dollar. Conversely, if Powell is dismissed, US government bond yields might spike, further weakening the dollar index and strengthening the baht to around 32.30 per dollar.