Despite a recent correction, the domestic gold price in Thailand remains on course to reach 60,000 baht per baht-weight, traders say, as they caution that a high degree of volatility is on the horizon.
Last week the price of gold plunged below US$3,200 an ounce as US-China trade tensions eased. Domestic prices eased back to just above 50,000 baht per baht-weight (15.2 grammes)
Bullion bounced back to $3,217 after Moody's downgraded the US credit rating over the weekend, weakening the dollar, but this was still significantly lower than its all-time high of $3,500 recorded in April.
Domestic prices have also dropped significantly, with prices plunging by 1,000 baht per baht-weight in a single day on May 15. That drop, attributed to global sell-offs and a stronger US dollar, prompted investors to shift to short-term trading strategies amid rising uncertainty.
"The recent decline in gold prices is primarily driven by global sell-offs following lower-than-expected US inflation data. This has led to a strengthening of the dollar, exerting downward pressure on gold prices," said Warut Rungkam, director of analysis at YLG Bullion & Futures.
As a result, domestic gold prices have also fallen sharply. Even the weakening of the baht hasn't been enough to cushion the drop, he added.
Mr Warut noted that in the short term, gold prices are expected to remain highly volatile. Therefore, investors are advised to focus on short-term trading strategies to seize buying and selling opportunities during price swings.
Cholathis Nualplab, head of research at Hua Seng Heng Gold Futures, said close attention should be paid to international factors, especially signals from the US Federal Reserve regarding future interest rate hikes.
He shared a cautiously optimistic forecast, emphasising that if the US central bank pauses or reverses its rate hike cycle, global gold prices could regain momentum. He also noted that a weakening baht could act as a booster for local gold prices.
"Inflation might be easing, but structural pressures remain. Investors are still looking for safe havens, and gold continues to play that role," Mr Cholathis said.
Jerome Powell's comments on the US economic outlook and interest rate trajectory could provide further direction for gold markets, he added.
"As market attention turns to Mr Powell's speech and the upcoming release of US economic data, volatility will remain high, and investors should position accordingly."
Hua Seng Heng views that gold's support levels are at $2,957 and $3,123, with first resistance at $3,500 and next at between $3,700 and $4,000.
For the domestic price, support levels are projected at 46,700 and 49,300 baht per baht-weight, with resistance levels at 55,000 baht and in the range of 58,300 to 63,100 baht in the coming months. These projections are based on an expected exchange rate of 33.25 baht to the dollar.
According to both analysts, factors that will affect gold prices include US-China trade tensions, US trade agreements that support economic growth, geopolitical conflicts, the US interest rate trend, increased gold purchases by central banks and the global movement towards de-dollarisation.
While the gold market may not be on a straight path to 60,000 baht this year, the door remains open, especially if there are some crises or a black swan and economic conditions evolve in gold's favour in the second half of this year.
"For now, flexibility, vigilance and a deep understanding of macro trends will be essential for anyone looking to trade or invest in the precious metal," said Mr Warut.