Seven local gold futures dealers have proposed the central bank and capital market regulators set up a spot gold exchange to enhance Thailand as a regional gold trading hub.
But Kritcharat Hirunyasiri, the president of MTS Gold, said for such a market to have an edge over others in Southeast Asia, regulations governing the market must be relaxed.
The dealers want the Bank of Thailand and capital market regulators to allow the market to trade in US dollars and extend the trading period to be on a par with others that trade around the clock.
The spot gold exchange would help to boost the transparency of gold trading and have its own regulator.
The dealers are MTS Gold Futures, Ausiris Futures, GT Wealth Management, Hua Seng Heng Gold Futures, YLG Bullion and Futures, Classic Gold Futures and Globlex Securities.
Mr Kritcharat said the proposal is among several solutions initiated by gold futures dealers to ensure gold dealers do not become involved with foreign exchange speculation.
Prasarn Trairatvorakul, governor of the Bank of Thailand, said the central bank is in talks with government agencies including the Finance Ministry to regulate the local spot gold market.
The move comes after it was found the amount of foreign exchange transactions in gold trading was greater than the actual gold import and export value, indicating potential foreign exchange speculation.
The central bank has also requested that gold shops disclose information about their transactions outside the Thai bourse's futures exchange including online gold trading of physical gold.
Bank of Thailand data show gold imports in the first seven months this year totalled US$10.9 billion or 8.3% of the total gold import value.
The high level of gold imports are also blamed for the country's current account deficit at 0.2% of gross domestic product.
Last year, Thailand imported $12.4 billion worth of gold or 5.6% of the overall gold import value.
"We have submitted a letter to the Bank of Thailand and are ready to disclose all relevant details with the media if it will clear up anything that may remain doubtful. We'd like the central bank to hold a joint press conference with the dealers in order to ensure transparency," said Mr Kritcharat.
Kesara Manchusree, managing director of the Thailand Futures Exchange (TFEX), supports the idea of setting up a spot gold exchange, saying it could help to maintain the gold trading value in Thailand and prevent local gold dealers from sending trading orders abroad.
At the moment, Thailand is one of the world's major gold trading markets.
Ms Kesara admitted the gold futures volume has been considerably subdued in recent months.
Gold has fallen sharply, and some gold futures brokers have started sending orders to other gold markets such as the Chicago Mercantile Exchange.
"Establishment of such an exchange must be planned well and receive cooperation from all parties involved. Singapore set up its gold spot exchange a year ago with the intention of becoming a regional gold centre and financial hub," said Ms Kesara.