Local gold prices yesterday bounced back above 20,000 baht per baht weight on the weakening of the baht, after nosediving to 18,000 baht two weeks ago.
However, traders cautioned that the price would likely dip below 20,000 once exchange-rate volatility eased.
Gold rose 450 baht per baht weight (15.16 grammes) in one day to close at 20,400 for bullion.
The baht has lost 2.6% against the US dollar this week and was trading at 29.33/39 on Friday after touching 28.56 on Monday.
Gold plunged as low as 18,000 baht on April 17 when the market reopened after Songkran, after global gold prices fell 10% while Thai markets were closed for the long holiday.
Weak economic growth in China and concern about gold sales by European central banks triggered the global sell-off.
Kritcharat Hirunyasiri, president of MTS Gold, said the baht depreciation in the past few days was the major factor behind the rise in local prices.
"The weakening baht has caused local gold prices to shoot up abruptly by 450 baht in one day," he said.
"Once the baht stabilises, gold trading sentiment will return to normal and that could imply a price below 20,000 baht."
The global gold market remained highly volatile with US$1,500 a strong resistance level, he added.
Gold was quoted at $1,462 an ounce in London on Friday morning, compared with a year-low of $1,368 two weeks earlier.
"It's not the right time to buy as the market is not turning up. We recommended taking profit or opening a short position," said Mr Kritcharat.
On the Thailand Futures Exchange (TFEX), an increase in margin requirements that took effect this week has been affecting around 20% of total transactions. The number of gold futures contracts traded dropped to between 9,000 and 10,000 from 13,000 to 15,000 contracts earlier.
Boonlert Siripatvanich, chief executive at the gold trader Ausiris, expects that after market sentiment returns to normal, gold prices will stabilise in a range between $1,420 and $1,500 an ounce.
However, trade in currency is more volatile compared to gold, and the correlation between money and gold is close, so investors need to be careful, he said.
"For every one-baht appreciation, the local gold price will increase around 750 baht per baht weight," he cautioned.