Paisal Krutdumrongchai, TMB Asset Management's fixed-income fund manager, said he believed the price volatility was due to short-term profit-taking.

"There has been some selling-off following the drop in global prices, but there is still investment coming in. The fund has only been slightly affected it is just a paper loss. There are already signs of a rebound," Paisal said.

Gold prices in Hong Kong closed markedly lower yesterday as expectations of higher interest rates chased speculative money from precious metals, dealers said.

Gold closed at US$567.60-$568.10 (Bt217,000-Bt218,000) an ounce, down from Tuesday's close of $590.30-$590.80. It opened yesterday at $561.00-$561.50.

Investors increasingly believe the US Federal Reserve will continue raising the cost of borrowing to head off inflation, ending the era of cheap money, which triggered huge gains in commodity prices.

Higher interest rates hurt miners because gold is used as a hedge against inflation. As interest rates rise, the dollar strengthens and inflation stabilises, making safe, fixed-payment investments such as bonds more attractive relative to volatile investments like gold.

Gold prices last month soared to a 26-year peak as investors ploughed cash into the precious metal owing to worries about rising inflation and concerns over the Iranian nuclear crisis.

Piyarat Setthasiriphaiboon

The Nation, Agence France-Presse