The local price of gold rose Bt350 per baht weight yesterday, fuelled by renewed demand for the precious metal across the world as investors grow more fearful over the pullback of relaxed monetary policy in the United States.
On the other side of the coin, such fears brought about a plunge in Asian stock markets, which tracked Wall Street lower on renewed uncertainty among investors over when the US Federal Reserve will begin cutting back its huge stimulus programme, starting next month.
The SET Index lost 7.31 points, or 0.50 per cent, on turnover of Bt38 billion.
Foreigners remained net-sellers on the Stock Exchange of Thailand, with a Bt927-million net-sell yesterday.
Their month-to-date net-sells hit Bt9.9 billion, while year-to-date net-sells reached Bt86 billion.
The Gold Traders Association adjusted gold prices seven times yesterday, starting with a Bt450 increase in the early morning.
By 4.38pm, prices had risen by a net Bt350, bringing the gold-bar price to Bt20,150.
This was in line with the fluctuation of spot gold prices in London, which showed the biggest weekly gain in five weeks, to US$1,360 an ounce. The price of gold has fallen 19 per cent this year as some investors lost faith in the metal as a store of value, wiping $56.2 billion (Bt1.76 trillion) from the value of bullion-backed exchange-traded products (ETPs).
Filings showed this week that US billionaire John Paulson had cut his stake in SPDR Gold Trust, the biggest bullion ETP, by 53 per cent in the second quarter.
The metal’s slump this year spurred purchases of jewellery and coins, particularly in Asia.
“The break above $1,350 prompted a short-covering rally, even though expectations are still for the [US] Fed to scale back stimulus,” said Yang Xi, an analyst at Yongan Futures in Hangzhou, China, referring to some investors closing bets on losses.
“Physical demand for gold rises and falls with the price. Silver seems better placed, as industrial demand should increase if the economy recovers,” said the analyst.
JPMorgan foresees bullishness in the precious metal, based on the World Gold Council’s report that demand for physical gold remains strong and gold supplies could be constrained next month if labour strikes are initiated in South Africa.
Moreover, given the seasonal price hike during August and September and the positive sentiment ahead of the Denver Gold Forum, it said in a research note that there should be no surprise if the gold price were to rise.
Bank of America Merrill Lynch’s chief global technical strategist, MacNeil Curry, was reported as saying on Thursday that there is probably “further upside” in gold.
In fact, he is said to be “looking for a move up to the $1,410, potentially $1,450, area”. Three reasons were cited, including that the downtrend has been overstretched.
At around $1,360, the gold price is still some $600 below the September 2011 record high of $1,920.30 an ounce.
According to the World Gold Council, demand in the second quarter totalled 856.3 tonnes worth $39 billion, which represented decreases of 12 per cent and 23 per cent respectively from the same period last year.
Total gold supply contracted 6 per cent to 1,025.5 tonnes, driven by a sharp drop in recycling activity, said the council.