Gold market a wild ride for bullion

"However we trade everyday, as much as the supply we get from the foreign market, but limit sales to 10 to 20 baht weight per person depending on the gold shop. We don't want to keep any stock, as the gold price is swinging wildly, such as US$20 to $80 per ounce a day compared to $5 to $10 per ounce a day in the past.

Those who want to buy gold should come early in the morning, because lately our stock sells out before afternoon," Pichaya Phisuthikul, secretarygeneral of the Gold Traders Association, said yesterday.

Trading of gold bullion was cancelled on weekends, starting with last weekend, and allowed only from Monday to Friday. But many local gold shops had stopped trading in bars since last weekend because of a lack of inventory.

Earlier, the association had announced the end to trading of bullion on weekends, when the overseas gold market is closed and reference prices are unavailable. The measure was meant to protect traders from the risk of financial losses, as the gold market has been highly volatile.

Yesterday, many people wanted to buy gold but several shops weren't dealing in bars.

Pichaya said the gold traders didn't stop selling but they traded as much as they had in stock, while imports could not always be made because foreign traders also faced limited quantities.

They would stop trading until they receive a new supply, he said.

Besides, the gold price has been falling, so there was a lot of demand in Asia and Europe, especially from this region, like China, Taiwan, Hong Kong, Thailand, Vietnam and India, which like gold. That has created a shortage.

Yesterday gold was priced at $746 per ounce at 9am and fell to $722 per ounce in the afternoon.

Pichaya said he expects the current market situation would continue for awhile and return to normal when the global financial system stabilises.

In the past, local traders would get gold on the following afternoon after sending a purchasing order and completing the money transfer. But at present, they need to wait for 14 working days, and after that they need to spend one to two more days to transform the gold from onekilo bars of 99.99percent purity to 10baht bars of 96.5percent gold.

If anyone wants to buy gold now, they have to pay 100 per cent of the price and submit a copy of their identification card, and they would get the gold about 15 working days later.

The association discovered that some gold buyers had left the bearish equity market to speculate in bullion. Some of them would like to protect their savings by moving their investment into gold, as the deposit insurance law would reduce the amount of bank deposits guaranteed. Some of them lost money on their mutual funds that were heavily weighted in foreign bonds such as Korean bonds. They need to get a profit from gold investment to compensate for their loss.

Meanwhile, gold fell in Asia as investors sold the precious metal for cash after equities extended a slump on concern the global economic slowdown is deepening and government measures won't be enough to stimulate growth.

Asia's benchmark MSCI Asia Pacific Index fell for a fourth day, by as much as 6.2 per cent, even after the Bank of Korea cut borrowing costs by an unprecedented 75 basis points and Japan said it will compile a package of measures to support the country's stock market.

"Gold is a safe haven but right now people are just fleeing for cash," said Tetsuya Yoshii, vice president for derivative products at Mizuho Corporate Bank Ltd.

Gold for immediate delivery fell as much as 1.5 per cent to $723.78 an ounce, and was at $725.28 in afternoon trading in Singapore. Earlier the metal rose 1.7 per cent. Silver for immediate delivery was down 2.5 per cent at $9.13 an ounce.