Renewed demand by central banks worldwide including the Bank of Thailand amid signs of a declining US economy and dollar depreciation pushed global and domestic gold prices to a new high.
Spot gold in Singapore peaked at US$1,670.85 an ounce, prompting Thailand's Gold Traders Association to raise domestic reference prices four times yesterday. Bullion in Thailand was last sold at Bt23,450 per baht weight, while ornaments went for Bt23,850. Domestic gold prices were raised by Bt550 per baht weight yesterday. In a month, it rose by $170 per ounce. At $1,700, domestic gold price will hit Bt24,000 per baht weight.
Even though the US debt deal was passed on Tuesday, investors across the globe were bearish over the torpid second half as US consumers have zipped up their wallets and the government moved to cut more spending. Consumer spending dropped, while data show a high unemployment rate and the slowest US manufacturing growth in two years. Gold again is seen as a safe haven for investors.
Asian equity markets including the Stock Exchange of Thailand's slumped as traders switched their attention from the US debt deal to the weakening global economic outlook and fears of fresh sovereign debt contagion in the eurozone.
UBS raised its one-month gold forecast to $1,725 an ounce from $1,575, and three-month forecast to $1,850 from $1,600. Eugen Weinberg, an analyst at Commerzbank, said in a Bloomberg Television interview from Frankfurt that central banks would need to buy "several hundred" metric tonnes of gold a year.
The Bank of Thailand showed that its gold reserves reached 133.2 tonnes as of June. As of July 22, Thailand was sitting on international reserves of $185.9 billion. London-based World Gold Council data showed that the Bank of Thailand, after maintaining gold reserves at 84 tonnes from 2004-10, bought 15.6 tonnes in July last year and 9.3 tonnes in March of this year.
In the first five months of this year, central banks added 155 tonnes valued at about $8.18 billion, which doubled the amount bought in all of 2010, World Gold Council data show.
According to data from the International Monetary Fund (IMF), the Bank of Korea bought 25 tonnes from June-July to lift reserves to 39.4 tonnes. Kazakhstan's holdings also increased by 3.1 tonnes to 70.4 tonnes in June.
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