Gold prices surge 4% over Covid, baht fears
Investors advised to do short-term trades
Thai gold prices have climbed 4% in the past three weeks, spurred by a 2% increase in the global gold price, the baht's depreciation, and fears over a major uptick in the number of new infections.
The local gold bullion price with a purity of 96.5% hiked to 28,016 baht per one-baht weight on Wednesday. The price reached its highest in the last two months in May, while its low point was in June at 26,287 baht.
"The domestic gold price has made unusual movements the past 10 days. The price normally declines when the US dollar appreciates. However, the decline of US bond yields, from 1.5% to 1.3%, has caused the gold price to rebound as institutional investors and central banks are collecting gold," said Kritcharat Hirunyasiri, chief executive and founder of MTS Group.
He said institutional investors' purchases of gold may reflect the market's expectation that the US Federal Reserve may not taper its quantitative easing soon.
The local gold price rose by 1,500 baht or about 4% in three weeks thanks to a weakening baht, which has depreciated by almost 1 baht in a month against the US dollar.
"The local gold price is moving sideways to up," said Mr Kritcharat.
He said the domestic gold price is at a breaking point and may rise again if it can penetrate a significant resistance line at 28,100 baht per one-baht weight, or a spot gold price of $1,815 per ounce.
The movement is similar to the spot gold price, which continues climbing and has edged near the resistance line at $1,850 per ounce several times.
The local gold price is expected to rise from a short-term technical analysis. However, the medium-term and long-term analyses suggest the price will continue on a downtrend unless the price moves above $1,815.
Mr Kritcharat said if the US producer price index and the Fed send a signal that inflation is unlikely to reach a worrying level, the global gold price can possibly break $1,815 by next week, followed by an uptrend.
Varut Rungkhum, head of research at YLG Bullion & Futures, said the global gold price will move along a wide range of $1,798 to $1,816.
Mr Varut said if the price cannot penetrate $1,795-1,791, it will drop to a new baseline.
YLG recommends a short-term trading strategy to earn profits from price fluctuation by purchasing when the price drops to about $1,795, and cutting losses if the price dips below $1,791.
He suggests gold investors take a wait-and-see approach.
Hua Seng Heng gave a resistance line of $1,820-1,825, and support lines at $1,790 and $1,770.
This year the domestic gold price has moved in a range of 24,500 baht per baht weight, with the lowest in March, and 28,150 baht for a high at the end of May.
The global spot gold price moved along at a low of $1,684 per ounce in March, while its high was $1,944 per ounce in January.