“Gold” prices in the country surged to a new high of 27,650 baht per baht of gold after the ECB injected over 750 billion euros. Analysts predict that global market prices could surpass the previous high of $1,920 per ounce, advising to watch for 3 signals that may pressure prices in the future.

Yesterday (July 22), gold prices in the country, according to the Gold Traders Association, reached a new peak of 27,650 baht per baht of gold. Previously, the domestic gold price had peaked at 27,000 baht per baht of gold on September 6, 2011. The rise in domestic gold prices is attributed to the increase in global gold prices, which hit a nearly 9-year high at $1,860 per ounce.

The reason domestic gold prices have reached a new high while global gold prices have yet to surpass the previous high of around $1,920 per ounce is due to the current depreciation of the baht compared to 2011. Currently, gold prices are based on an exchange rate of 31.61 baht per dollar, while in 2011, the baht was at 29.91 baht per dollar.

Mr. Jitti Tangsitphakdi, president of the Gold Traders Association, stated that domestic gold prices have set a record high of 27,750 baht per baht, breaking the previous record. Investors hoping for prices to reach 30,000 baht per baht of gold may find it unlikely, as current prices are already quite high. Initially, there is a need to aim for 28,000 baht per baht of gold first, but at the same time, caution is advised regarding profit-taking during this period.

Currently, global gold prices are around $1,860 per ounce, with expectations that they may rise to $1,875 per ounce. Whether they can surpass the previous All New High remains to be evaluated.

Ms. Benjama Mainth, director of analysis at YLG Bullion and Futures Co., Ltd., revealed that the factors supporting gold prices at present stem from economic stimulus policies in both monetary and fiscal terms. It is expected that the U.S. Federal Reserve may signal further economic stimulus next week, while the European Central Bank has approved a recovery fund with an injection of 750 billion euros.

“As more money enters the system, the market begins to anticipate that it will drive inflation higher, putting pressure on real interest rates to turn negative, similar to the period from 2009 to 2011 when there were concerns that QE measures would lead to severe inflation (Hyperinflation), resulting in a significant surge in gold prices,” she said.

Additionally, the slow recovery of the economy from the second wave of COVID-19, along with political tensions between the U.S. and China, has contributed to increased buying pressure in gold. The SPDR gold fund has purchased 326.05 tons of gold since the beginning of this year, bringing its total holdings to 1,219.75 tons. The total purchases this year are nearing the total of 353.39 tons made by the SPDR fund throughout 2009.

“The buying pressure currently supporting gold prices has the potential to push prices to test the previous high of $1,920 per ounce, but in the short term, profit-taking may occur, considering the technical signals indicating an 'overbought' condition,” she added.

Investors should monitor 3 key factors that may signal the nearing end of the gold price surge: the holdings of gold by the SPDR fund. Historically, in 2012, the SPDR fund began to significantly reduce its gold holdings, continuing to decrease in 2013. If this trend repeats, gold prices could see a correction.

Next is the monetary policy actions of the U.S. Federal Reserve, such as reducing the scale of economic stimulus or announcing an end to economic support. Historical data shows that these economic stimulus measures have been a significant support for rising gold prices.

Lastly, the development of vaccines and treatments for COVID-19, if successful and widely distributed, is believed to lead to a global economic recovery, prompting profit-taking in gold as a safe-haven asset.

Overall, it is assessed that gold prices still have the potential to rise further, and investors may consider accumulating positions if prices drop to test the first support level around $1,795 to $1,803 per ounce, or about 26,800 baht per baht of gold. The next support level is $1,763 per ounce, or about 26,350 baht per baht of gold.

Mr. Somchai Amorntham, assistant managing director of investment strategy and customer relations at Krung Thai Asset Management Co., Ltd., stated that the trend for gold prices may continue to rise, with Krung Thai Asset Management projecting gold prices to move within a range of $1,800 per ounce by the end of this year.

The market is starting to predict prices could reach $2,000 per ounce due to several factors expected to persist for some time, including concerns over the COVID-19 pandemic, high liquidity from central bank stimulus measures, and the trend of a weakening dollar, which has already supported rising gold prices. As of July 21, 2020, gold prices have increased by approximately 21% compared to the beginning of the year.

However, the situation may reverse in the near future, especially with positive news regarding vaccines, which could lead to increased volatility in gold prices. Therefore, investors should exercise caution, as the previous peak at $1,900 per ounce was followed by several years of decline, leading to expectations that investors currently holding gold may use this opportunity to take profits and adjust their portfolios accordingly.

Ms. Chayanee Juengmanon, senior analyst at Morningstar Research (Thailand), revealed that profit-taking has occurred following the significant rise in gold fund returns averaging 17%, resulting in net outflows of approximately 6 billion baht from gold funds in the first half of 2020, higher than the net outflows of about 2 billion baht during the same period last year.

Consequently, the outflows have led to the net asset value (AUM) of gold mutual funds in the first half of 2020 standing at 29 billion baht, a decrease of about 5% from the end of the previous year.

However, it is assessed that the trend for gold funds this year will continue to see net outflows from the previous year, with likely more profit-taking than buying pressure, as gold prices have risen significantly and the potential for further increases is quite limited.

SOURCE : www.bangkokbiznews.com