Local gold prices hit three-month high

Local gold prices hit three-month high

Sliding baht, share prices are key factors

Bars of gold are arranged for a photograph at the headquarters of YLG Bullion International in Bangkok.
Bars of gold are arranged for a photograph at the headquarters of YLG Bullion International in Bangkok.

Thai gold prices hit a three-month high at 28,200 baht per one-baht weight on Tuesday, spurred by the depreciating baht which hit a 13-month low and the continued decline of Thai shares amid rising Covid infections.

Meanwhile, cryptocurrencies led by Bitcoin slid to below a million baht for the first time in nearly two months.

The global spot gold price continues to move sideways along the range of US$1,800-1,835 supported by uncertainties in the money and investment markets where the risk-off mode has been turned on.

Benjama Ma-In, head of research at YLG Bullion International Co, said the sideways trend was caused by the movement of funds from risky to safe-haven assets such as the US dollar and the bond market. Fund flows into the bond market have also caused the bond yield to drop and support gold.

Ms Benjama said the weakest baht in over 13 months has supported gold. A safe price point to buy is at around 28,000 baht while the point to make short-term profits is at 28,350-28,550 baht. The point to cut losses for short-term profits is 27,800 baht.

The level is converted from a global spot gold support line at $1,790 and $1,835 per ounce.

"Local gold prices will likely continue on an uptrend in the long term considering the trend line and its highs and lows since 2019," she said.

The Federal Reserve and its decision to extend its monetary policy and the weakening baht remain key factors for the local gold price.

The delay of the interest rate hike will help support the precious metal. Moreover, the steep drop in Bitcoin price and other altcoins due to regulators' crackdowns on assets will also allow gold to return, she said.

However, the gold price will not drastically fluctuate unlike last year, Ms Benjama said.

The local gold price hit an all-time high of 30,300 baht in August last year and the year's lowest of 21,350 baht at the beginning of last year.

Meanwhile, the global spot gold price reached an all-time high of $2,075 and reached the year's lowest at $1,451 when the Covid-19 outbreak started last year.

The Thai stock market continues to decline in line with foreign stock markets due to concerns over the rapidly spreading Delta strain of coronavirus.

Moreover, oil prices have slid due to Middle Eastern oil producers' decision to increase production, resulting in sales of energy stocks, an analyst at Krungthai Zmico Securities said.

The SET Index on Tuesday dipped 1.10% to close at 1,538.86 points with trade worth 92.96 billion baht. The most active stocks were PTT Plc (PTT) which dropped 2.05% and Kasikornbank (KBank) which also dropped 3.11%.

Bank of America gave a negative outlook on US growth which is expected to drop after the number of infections rebounded. Concerns over the increasing cases have driven investors to safe-haven assets such as government bonds and the US dollar, the analyst said.

In the Thai stock market, investors have reportedly sold cyclical stocks such as banks and energy and moved to technology and high-growth stocks amid growing concerns over lockdown measures in 13 provinces. The measures are expected to affect cyclical stocks' profits related to domestic consumption.

Factors that need to be monitored include sharp rises in the number of infections worldwide, operating results of the domestic banking sector in the second quarter which will be announced this week, and US-listed firms' performance that will dictate the direction for securities investment in the next one to two weeks, the analyst said.

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