Thailand and other Southeast Asia nations are experiencing a gold rush, as people are flocking to purchase gold as a secure haven in the face of inflation and global market volatility.
Some investors are experiencing anxiety as a result of the Biden administration’s economic policies, which include substantial expenditure packages. Consequently, creating a .gold rush in Southeast Asia.
Political instability in the United States has resulted in a significant increase in demand for gold in China, Vietnam, and Thailand. Consequently, gold prices have experienced a significant increase, which is indicative of the widespread skepticism regarding the stability of the US greenback.
Langford, executive director of corporate consultancy Airguide International, told the South China Morning Post that the prices of gold have increased in the past six to 12 months due to the demand in Southeast Asia.
In May, gold prices reached an all-time high of US$2,450 per ounce, continuing to rise to new heights this year. Investors in China have also pursued gold as a secure haven due to the declining confidence in stock and property markets.
Anxiety regarding currency devaluations, geopolitical instability, and economic instability is promoting a migration to gold, a conventional investment that serves as a reliable refuge. Each week, you will receive the most urgent stories and in-depth analyses from the Asia region.
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The impact of currency depreciation is most severe on small-time investors, as it erodes their savings and increases inflation.
Central Banks Investing in Gold
Shaokai Fan, the World Gold Council’s director of central banks and Asia-Pacific, stated to the South China Morning Post that Southeast Asians are particularly inclined to purchase gold due to their long-standing conviction that the metal is a tangible and dependable “long-term store of value” in comparison to other assets.
Central banks are also purchasing gold at a “blistering rate,” according to the Council, in addition to these everyday investors who are seeking a secure haven.
A survey published by the council on June 18 revealed that over 80% of central banks anticipate their reserve managers to increase their gold holdings over the next 12 months. This is a measure to protect against heightened geopolitical risks and mounting macroeconomic uncertainties.
Fan, the council’s central banks and Asia-Pacific head, stated that “extraordinary market pressure, unprecedented economic uncertainty, and political upheavals around the world have kept gold front of mind for central banks.”
“What has been remarkable is that, despite the fact that the official sector has experienced record demand in the past two years and gold prices have been increasing, many reserve managers continue to maintain their enthusiasm for gold.”
High interest rates in the United States would typically result in a decrease in gold prices. However, the persistent strength of gold indicates that investors are more concerned with persistent global inflation, economic uncertainty, and geopolitical tensions than with increasing rates, according to a May analysis by Xu Le, a strategy and policy lecturer at the National University of Singapore Business School.
Thailand and Vietnam Gold Rush
The World Gold Council reported that investors in Asian markets are deviating from their normal practice of purchasing gold exclusively during price declines, choosing to acquire the precious metal even as prices increase.
China and India have historically dominated the broader regional market, while Thailand and Vietnam have been among the largest gold consumers in Southeast Asia.
Local reports indicate that gold buyers flocked to Vietnam’s state-owned institutions in June following the central bank’s decision to increase gold sales in order to satisfy public demand and reduce their prices.
The depletion of banks’ supplies was rapid, necessitating the restriction of purchases to one trillion per customer. The queues persisted for weeks until the institutions implemented an online registration system for gold purchases, which also filled up within minutes on a daily basis.
Huynh Trung Khanh, vice-chairman of the Vietnam Gold Traders Association, stated at the Asia-Pacific Precious Metals Conference in Singapore in June that the sell-off temporarily alleviated gold prices; however, they continued to rise due to buyers’ concerns regarding the ongoing devaluation of the dong, the frozen real estate market, and the plummeting savings interest rates.
As he stated, “Gold bars have now become the primary investment channel in Vietnam.” “They are currently standing in line to purchase bars in both the sun and the rain.” Previously, commercial institutions sold two tonnes of gold in a single month; however, they have now sold two tonnes in a single week.
Increase in gold prices
Since the conclusion of the pandemic in 2022, the dong, the currency of Vietnam, has declined by approximately 10% in relation to the US dollar. This trend has persisted, according to foreign exchange data.
Ordinary investors are also gravitating to gold in Thailand. At the Asia-Pacific Precious Metals Conference, Nuttapong Hirunyasiri, the managing director of MTS Gold Group, disclosed that this was the first instance in his professional tenure in which Thais purchased gold during periods of price increases.
Since 2022, the Thai baht has also experienced a depreciation of approximately 10% against the US dollar, similar to Vietnam’s dong. According to foreign exchange and market data, inflation reached 1.54% in May, the greatest level since April of the previous year.
Chinese investors also contributed to the increase in gold prices by participating in the purchasing frenzy. Videos on TikTok and its mainland counterpart In cities such as Shenzhen, Douyin, the Chinese counterpart, has documented massive lines of individuals waiting to purchase gold.
Queues were absent in regions such as Singapore, where the currency and economy maintained their stability. Nevertheless, a retailer in the city’s Little India reported that customers frequently purchase gold as a hedge against prospective interest rate fluctuations.
Source: SCMP