Treasury Outlook: Experts differ on what is behind rises in gold, oil

Market participants differ in their views about these upward price movements. One school of thought says the rise in prices of stocks, gold, oil and other commodities is a sign of economic recovery, while another says they are only symptoms of the present economic downturn.

Central banks around the world have injected liquidity into the market, in order to stimulate their economies, but they have done so with a credit market that is not fully functional. Therefore, excess liquidity is flowing to stock and commodity markets.

There is no common reason for each movement in those assets. Each asset class has its own fundamentals that justify its price movements.

Take the price of gold, for instance, which we believe is at a high level due to the diversification of US-dollar holdings. Readers may remember the Indian central bank recently bought a large amount of gold from the International Monetary Fund. That country, as well as China and Russia, has been calling for an alternative reserve currency. There is as yet no such alternative, so gold is a substitute.

For other commodities, liquidity is the major reason behind price movements. Analysts are chattering about possible asset bubbles, and should the economic fundamentals of commodities not justify their price levels, they will eventually lose their value.

On the domestic front, the baht has strengthened against the dollar over the past month, which is in line with other regional currencies. We believe the baht could strengthen further and test the 33 level soon, given the fact that Thailand's external balance is positive at the same time the dollar is weak.

However, movement of foreign-exchange rates is like that of commodity or stock prices in that it could go either way, and because of this we must adopt prudent risk management at all times.