Gold-futures trading in the past three months dropped 10 per cent from the preceding three months because of the baht's appreciation, which pressured domestic gold prices, a brokerage said yesterday.
"Many investors are stuck, unable to sell their futures. Those entering the market now should invest only when physical gold prices are in the range of Bt18,000-Bt18,600 per baht weight," said Tipa Nawawattanasub, chief executive of YLG Bullion & Futures. One baht is equal to 15.244 grams, or about half a troy ounce.
Although global gold prices have escalated, domestic prices rose at a milder pace, she said. Investors have switched from daily transactions to striking orders on alternate days, which reduced volume, she said.
The baht gained more than 3 per cent against the US dollar in August, thanks to higher interest rates, which drew new capital inflows, she said.
Gold-futures investors will experience foreign-exchange risks, she said. Because of the strong baht, the mini gold futures launched in August could not boost trading.
In the first eight months of this year, YLG executed 8,420 gold-futures contracts, mostly for retailers, gold shops and high-net-worth individuals, with an investment portfolio of Bt30 million. It counts few foreign and local institutional investors among its clients.
The company is hopeful that once the Thailand Futures Exchange extends the gold-futures trading period some time in the first quarter of next year, turnover should rise accordingly.
Pawan Nawawattanasub, vice president of YLG, said gold-futures trading in the past eight months was highly volatile in line with gold-price fluctuations. During the period, many factors affected gold prices, chiefly the economic indicators of the United States and European countries. Late in June, gold prices hit a record high of US$1,265 per ounce when the European crisis was at its peak. However, when authorities launched measures to ease the debt crisis, gold prices weakened to this year's new low of $1,155 per ounce.
Gold prices could rise further to $1,300-$1,350 per ounce from now to the end of this year, on growing concerns over global economic health, she said. Factors to watch are unemployment, signs of a property bubble, foreign-exchange volatility, interest-rate normalisation in many countries, and the huge budget deficits and public debts, she said.
YLG has maintained its No 1 position as a bullion trader, with volume reaching 75 per cent of its 2010 target of 200 tonnes. This shows 30-per-cent growth from last year, when volume was 150 tonnes.
Pawan attributed the increase partly to the higher prices in the first half, which attracted new investment into physical gold.