Gold prices rallied to a near eight-year high yesterday, breaching US$1,760 per ounce, buoyed by the US Federal Reserve chairman's pessimistic comments on the US economic recovery and the pandemic.
The gold price quoted in US dollars hovered at 1,762.23 per ounce as of press time, while the prices of local gold bar and gold ornaments with 96.5% purity were valued at 26,600 and 27,100 baht per one-baht weight gold, respectively.
People thronged the streets of Yaowarat Road yesterday to sell their gold holdings, with a few opting to purchase the yellow precious metal. The mob of sellers was a continuation of a trend started last Friday that lasted over the weekend.
In mid-April, people stood patiently in queues stretching hundreds of metres to reach goldsmiths' counters to sell the metal for cash on Bangkok's Yaowarat Road, home to major goldsmiths.
Remarks by Fed chairman Jerome Powell indicating the US economic recovery may take until next year to yield results because of the ravages of the pandemic have caused investors to seek refuge in the safe haven, said Tanarat Pasawongse, chief executive of Hua Seng Heng Group of Companies.
"The market is still worried the economic recovery could be longer than expected and is monitoring a possible second wave outbreak," said Mr Tanarat.
Gold is often sought as a safe store of value in times of economic turmoil and benefits from central bank easing that pushes down bond yields and raises fears of inflation eroding the value of other assets.
Growing tensions between China and the US over the outbreak are renewing fears of the tit-for-tat trade war, he said.
"The US-China trade war will prolong and support the price of gold in this period. The dispute may last until the US presidential election [in November]," said Mr Tanarat.
MTS Gold chief executive Nuttapong Hirunyasiri said investors are worried about negative interest rates through monetary stimulus mechanisms, which would weaken the dollar.
"We are perhaps seeing the beginnings of the long-awaited inflation hedge occurring, as opposed to safe-haven trade," said Jeffrey Halley, senior market analyst of Asia-Pacific at Oanda Corporation. "The amount of monetary policy easing, conventional and unconventional, cannot be ignored and unlike the 2008 financial crisis, a post-pandemic nationalised supply chain has the potential to generate inflation that has been missing in action for 20 years."