Deputy Prime Minister and Finance Minister Kittiratt Na-Ranong has brushed aside the Bank of Thailand's proposal to regulate the spot gold market after the central bank found discrepancies between spot market trades and the US-dollar value of transactions.
"It's not necessary to issue any law to govern the market, because it's open to all currencies. If we consider gold as a currency, it does not need any special regulations," he said on Thursday.
Bank of Thailand governor Prasarn Trairatvorakul recently said the central bank was discussing regulation of the spot gold market with the Finance Ministry, the Stock Exchange of Thailand and the Securities and Exchange Commission.
The central bank had found that the amount of foreign exchange transactions for gold trading was greater than actual gold imports and export value, indicating that some gold dealers could have exploited this channel to speculate on the exchange rate.
Mr Prasarn also voiced concerns that online retail investors could fall victim to some gold dealers.
Mr Kittiratt said the ministry is not worried about the current account deficit resulting from gold imports.
"It's a good thing that we import gold and that people accumulate gold for savings. Speculative activities are normal practice in the market, but we need to prevent it from being too volatile," he said.
In the first seven months of this year, Thailand imported US$10.9 billion worth of gold or 8.3% of total import value.
This was blamed for the country's current account deficit of 0.2% of gross domestic product.
Last year, gold imports to Thailand were worth $12.4 billion or 5.6% of total import value.
"Nowadays, we don't have a single spot gold centre. If we want to take care of the market, those related to the market should talk to one another," Mr Kittiratt said.
Following the central bank governor's comments, gold futures dealers proposed that policymakers and regulators should consider setting up a spot gold exchange to boost the transparency of gold trading.
They also suggested using dollars to facilitate transactions at the proposed exchange.
Mr Prasarn said a working panel chaired by Somchai Sujjapongse, director-general of the Fiscal Policy Office, has already been formed to consider the proposal for a spot gold exchange.