Gold traders seek clarity on exchange

Gold traders seek clarity on exchange

The Gold Traders Association (GTA) plans to ask the Stock Exchange of Thailand to confirm its stance on the establishment of a physical gold exchange in the next two months after the SET chief told the media that plans for it had been scrapped.

Gold dealers in mid-May held talks with the SET about the spot gold exchange's incorporation, but there was no conclusion, and they planned to talk with the stock exchange again, GTA president Jitti Tangsitpakdi said.

SET president Kesara Manchusree recently said the SET would abandon its plan to set up the spot gold bourse on concerns about investment worthiness, as only gold products would not be able to attract sufficient transactions to cover expenses.

She also proposed launching new gold products on the Thailand Futures Exchange (TFEX) instead.

According to TFEX data, the daily average trading volume of the precious metal reached its highest level in 2011 at 16,243 contracts before falling to 14,867 in 2012, 9,009 in 2013 and 6,293 last year.

Gold futures transactions have averaged 5,578 contracts a day this year.

Gold futures are traded in two sizes — 50 baht-weight and 10 baht-weight.

The decline in trading volume has caused losses for gold future brokers.

"Gold brokers see a net loss of more than 2 million baht each month at present," Mr Jitti said.

He said the trading volume of the gold market, especially physical gold bars and paper gold, had been subdued for a while, as prices had been moved down, narrowing opportunities for brokers to make arbitrage trades.

Gold imports declined to 67 tonnes in the first four months of this year and are expected to dip to 160 tonnes this year from 323 tonnes last year.

Kamoltun Pornphaisarnvichit, analyst manager at GT Wealth Management, said the local gold price was likely to break 20,000 baht per baht-weight if the Monetary Policy Committee cut its benchmark rate for the third time this year.

Another rate cut would probably cause the baht to weaken to 34.50 to the US dollar, which would send the gold price to 20,300 baht.

The rate-setting panel's policy rate call is due today, but economists forecast it will leave the rate unchanged at 1.5% after successive rate cuts this year of a quarter-percentage point.

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