Local gold bullion tumbled 2,400 baht per baht weight (15.244 grammes) on Wednesday, the first day of trading after the Songkran holiday, as gold experts warned the downward trend could continue.
A gold rush: Buyers flock to a gold shop on Yaowarat Road after prices fell by 2,400 baht per baht weight on Wednesday. THANARAK KHOONTON
Thailand Clearing House (TCH) also announced it would raise the maintenance margin and initial margin requirements for gold and silver futures, effective on April 22.
Local gold prices plunged by 2,350 baht per baht weight when gold shops opened yesterday morning.
The prices were revised eight times for a total loss of 2,400 baht per baht weight yesterday.
The baht's gain against the greenback to a fresh 16-year high of 28.82/85 yesterday dealt another blow to local gold prices.
The price for bullion sold to goldsmiths was 18,850 baht while the price for bullion bought from them was 18,950 baht per baht weight yesterday.
Like physical gold, gold futures in the Thailand Futures Exchange (TFEX) yesterday fell to the daily's 10% floor and triggered a circuit breaker, a first for gold paper since it has been available on the TFEX for seven years.
A 30-minute trading halt followed for gold and silver futures from 9.45am. They resumed trade from 10.15am.
After the trade resumed, the floor was widened by another 10% to 20% of Friday's latest settlement price.
At yesterday's market close, gold futures settlement prices plunged to 18,990 baht for April delivery, 19,060 baht for June delivery, and 19,130 baht for August delivery from 2,380 baht, 2,390 baht and 2,420 baht, respectively.
Gold yesterday stood at $1,374 an ounce in London market after it shed $125 an ounce, its biggest-ever daily drop, on Monday. It has fallen significantly from the record high of $1,920.30 in September 2011.
The sell-off in gold was sparked by the concern that European governments may have to follow Cyprus in selling part of their holdings.
Cyprus plans to sell part of its gold reserves over the next few months, a decision that needs to be approved by the country's central bank, Finance Minister Haris Georgiades said.
The new maintenance margin and initial margin for 50-baht-weight gold contracts will be 40,000 baht and 76,000 baht from 30,000 baht and 57,000 baht, respectively.
The new maintenance margin and initial margin for 10-baht-weight contracts will be 8,800 baht and 15,200 baht, while those for silver will be 5,500 baht and 10,450 baht, respectively.
"The increase in maintenance margin requirement is to send a signal to investors that precious metals are highly volatile. However, the new margin requirements don't take effect immediately," TFEX president Kesara Manchusree said.
TFEX Tuesday eased its block trade requirement for gold futures from the minimum of 100 contracts to one contract to allow investors seeking to unwind their positions to do so more quickly.
The market correctly predicted gold futures prices would play catch-up with the sharp fall in global gold prices when trade resumed after the Songkran holiday.
The rule takes effect for three days starting yesterday.
Pawan Nawawattanasub, a vice-president of YLG Bullion International, said her company had a bearish view on gold prices.
Should they fail to stay above US$1,500 per ounce, the downward trend will continue, she said.
She added that investors should stay on the sidelines for now to observe market developments.
Kritcharat Hirunyasiri, president of MTS Gold Futures, said local gold prices remain on the downward trend.
Despite the sharp fall in gold prices, few investors were forced to close their positions as almost all decided to deposit more money to maintain their positions, he said.
About the author
- Writer: Darana Chudasri
Position: Business Reporter