A clear signal from the Federal Reserve this week that another rate hike is possible this year and rates will likely remain elevated throughout 2024 affected not only stock markets and currencies, but also gold prices.
The Fed statement on Wednesday led the US dollar and bond yields to rise and added selling pressure to gold as investors lowered their price expectations for the precious metal over the coming months.
As a result, gold prices retreated on Thursday, with spot gold easing 0.1% to US$1,927.84 per ounce. US gold futures slid 1% to $1,948.10.
A day earlier, bullion hit its highest level since Sept 1 before the central bank lifted its US GDP forecast and made the "higher for longer" comment about rates.
The Fed also brushed aside the likelihood the US economy slips into a recession, reducing the demand for safe-haven assets such as gold.
The domestic gold price rose to a record high of 33,550 baht on Sept 20, with baht depreciation the main factor driving the price. The baht has weakened by 11% this year to date.
According to the Gold Traders Association, the domestic gold price climbed from 29,000 baht at beginning of the year to the record of 33,550 baht per baht weight on Wednesday when the currency plunged to 36.28 baht to the dollar.
UPWARD TREND
MTS Gold Futures predicts the international gold price has a main resistance level of $1,945-1,950 an ounce. The domestic gold price is also on an upward trend as the baht is likely to depreciate further.
Pawan Nawawattanasub, chief executive of YLG Bullion International, said although the weak baht supports the domestic gold price, this is expected to be short-lived.
"The government's stimulus for the tourism sector with measures such as free visas for Chinese tourists should increase demand for the baht. This will make the Thai currency appreciate," she said.
The World Gold Council (WGC) said gold held up well over the past couple of years, even though the dollar was strong and real US interest rates surged.
WGC chief market strategist John Reade predicts gold prices could rise to $2,050 per ounce once the Fed finishes its interest rate hike cycle, which is likely to happen next year.
Another factor that could drive the price of gold is whether the US has a recession, said Mr Reade.
Ms Pawan of YLG is more optimistic, anticipating gold prices will surge to a range of $2,075-2,100.
For the long term, there is an opportunity for the gold price to increase, she said. Over the next 3-4 years, Thailand is projected to have gold consumption of up to 100 tonnes per year, said Ms Pawan.
The record consumption level was 154 tonnes in 2013.
On average, Thailand consumes 63 tonnes of gold per year, which is the third-highest in Asia behind China and India, and ranks seventh globally.
GOLD INVESTMENT
One factor supporting higher gold consumption is the number of Thais buying and selling gold online as an investment is increasing. Support is provided by accessible, real-time information, available online at any hour.
This channel is likely to drive the domestic gold market to keep rising, said Ms Pawan.
For investors wondering why they should choose the precious metal, Sirapat Kaoteera from Krungsri the Coach, an advisory unit for private investment, said he believes investing in gold can beat inflation.
"If we look back at gold prices over the years, a decade ago it was 4,850 baht, meaning gold investment provided a return of 19.4% over that period. That is quite high when compared with bank fixed deposit interest rates that offer a return of 0.5-1.5% per year," he said.
"Investing in gold can beat inflation and is considered a safe-haven asset because its value does not decrease, even during times of war. Keeping some gold in an asset portfolio is recommended to diversify your investment risks."
Gold prices also fluctuate less than other risky assets, said Mr Sirapat.
Cryptocurrencies can reduce your principal by a double-digit percentage in a single day, but gold will not, he said.
Gold investment is available through several forms, such as gold bars, gold futures and mutual funds.
In addition to physical purchases, investment channels are convenient as consumers can buy gold online via brokers, traders or investment platforms run by asset management firms.
Most countries hold large amounts of gold as a reserve fund to fight inflation or when facing crises, which is one reason why people opt to invest in gold, said Mr Sirapat.