NESDB chief: Gold price drop temporary
- Published: 21/05/2013 at 04:48 PM
- Online news:
The decline in the global gold price will be only temporary and will rebound on speculation that Italy and other countries in Europe may have to sell gold reserves for debt repayment, the head of the NESDB said on Tuesday.
National Economic and Social Development Board (NESDB) secretary general Arkom Tempitayapaisit said he disagrees with an analyst at a foreign bank who forecast that the gold price is now on a five-year downward trend and will fall below US$1,000 per ounce. The gold price on Tuesday evening in New York was $1,380.16 per ounce.
It would be difficult for the gold price to continue downwar for five years, he said. Gold is held both as a reserve and as a speculative commodity. The current decline in price was because some countries in Europe have insufficient cash reserves to make debt repayments. They have taken up the option to sell some national gold reserves, thus bringing the price down.
A one-year chart shows the trend of world gold prices, under the value as of Tuesday evening Bangkok time. Chart by Goldprice.org
Cyprus had earlier sold gold and it is expected Italy will soon follow suit. This will bring down global gold prices for a short time, he added.
The Bank of Thailand also keeps gold as a reserve. If it sells gold now, it would face a loss because it bought in at a higher price, he said.
On Tuesday as of 4.05pm, local gold prices opened up 400 baht on Monday's close.
The Gold Traders Association announced buying prices at 19,162.24 baht per baht-weight for gold ornaments and 19,450 baht per baht-weight for gold bar. Selling prices were set at 19,950 baht per baht-weight for gold ornaments, and 19,550 baht per baht-weight for gold bar.
Meanwhile, the central bank's governor Prasarn Trairatvorakul said on Tuesday that monetary policy could be eased if the economy loses momentum. In short, this was a signal he may cut interest rates next week after slower-than-estimated growth last quarter. The Bank of Thailand's Monetary Policy Committee (MPC) is to meet on May 29.
"Our monetary policy aim is to maintain equilibrium in the economy," Mr Prasarn said. "If we see that economic momentum slows, we can ease monetary policy to take care of that."
The government's NESDB on Monday lowered its full-year growth forecast for gross domestic product to 4.2% to 5.2% from 4.5% to 5.5% after the economy expanded 5.3% in the first quarter from a year earlier, less than economists estimated. It also cut its export growth target for the year to 7.6% from 11%.
NESDB secretary-general Arkom said he is "worried about the second quarter," adding that monetary policy could address the slowdown and also help curb inflows that have boosted the baht.
The baht rose 0.3% to 29.72 per dollar as of 1.25pm Tuesday in Bangkok, after earlier climbing to its highest level in two weeks as concerns that the government will impose curbs on capital inflows abated. The currency strengthened last month to its highest level since July 1997, and is the best performer in Asia this year, according to data compiled by Bloomberg.
While the baht may be volatile amid global uncertainties, the central bank is ready to intervene if needed, Mr Prasarn said, adding that the central bank will analyse first-quarter data before deciding on the policy rate.
The BoT's Monetary Policy Committee is scheduled to meet on May 29. It has held the key rate at 2.75% since a 25-basis-point reduction in October, citing risks to Thailand's financial stability.
Finance Minister Kittiratt Na-Ranong, who has led calls for lower rates, said on Monday that the government has no plans to issue "abnormal measures" to stimulate the economy, even as it is concerned about the first-quarter numbers.
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