Thai gold demand, imports plummet as political crisis weighs

Mon May 19, 2014 5:01am EDT

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By Apornrath Phoonphongphiphat and A. Ananthalakshmi

BANGKOK/SINGAPORE, May 19 (Reuters) - Thai gold imports look set to stay weak after plunging to a fifth of last year's levels, with investors shying away from the metal amid prolonged political upheaval in the country.

Higher imports in 2013, when a sharp fall in gold prices prompted many consumers to bring forward purchases, have also sapped demand this year in the world's fifth biggest consumer of the metal.

Reduced shipments into Thailand, Asia's No.3 importer, could take the steam out of any short-term recovery in gold prices amid slowing growth in appetite for gold in the rest of the region.

"Investment interest in gold is a lot less because prices have been trending downwards (from the beginning of last year)," said Pawan Nawawattanasub, chief executive at YLG Bullion, Thailand's top gold importer.

"Another reason has been ... the long protests have hurt the economy and people would rather hold on to their money than spend on gold."

Gold is often viewed a safe-haven asset during times of political uncertainty, but in a prolonged crisis with declining business and consumer confidence, would-be buyers can prefer to save cash than invest in gold bars or splurge on jewellery.

Sales at YLG have fallen 30 to 40 percent this year compared to the same period in 2013, Pawan said.

Thailand has been in turmoil since anti-government protests flared up in November, the latest phase in nearly a decade of antagonism between the Bangkok-based establishment and supporters of former premier Thaksin Shinawatra.

The country has been run since December by a caretaker administration with limited fiscal powers and there is no end in sight to the crisis as protest groups seek to install an unelected government.

Consumer confidence is at a 12-year low, tourists are staying away from Bangkok and public spending has been delayed.

Thai gold imports fell 81 percent to 36.351 tonnes in the first quarter of this year, compared with 192.391 tonnes in the same period in 2013, according to data on the central bank's website.

"The sharp fall in gold imports this year is due to higher global prices, which have limited import demand at a time when most Thai gold traders are well stocked," said Jitti Tangsithpakdi, president of Thailand's Gold Traders Association

He added that traders had imported a lot last year due to lower prices at that time.

Gold prices fell 28 percent in 2013 after a 12-year bull run, unleashing a frenzy of physical buying across the world. This year, gold has gained about 7 percent, but some analysts say the fundamental factors supporting it are still weak.

CLAMPDOWN?

Late last year, the Thai central bank asked gold traders to start disclosing information on their trades due to suspicions that gold imports were being used in currency speculation, according to YLG Bullion.

The Bank of Thailand (BOT) wanted gold brokers and traders to submit documents about their transactions outside the Thai bourse's futures exchange, local media reported.

The BOT declined to confirm to Reuters whether it had introduced such regulations.

ANZ analyst Victor Thianpiriya said the BOT's move, following instances where there were substantial discrepancies between nominal U.S. dollar values for imports and the volume of gold actually imported, has also had an impact on imports this year.

"The clamping down on this practice has raised the administrative burden on all gold importers, with traders required to show evidence of underlying gold trades, to access the foreign currency used to pay for imports," Thianpiriya said.

YLG's Pawan said imports at her firm were not affected by the BOT step as it had had time to get used to the development.

In response to questions on whether the central bank had made any other moves this year to curb gold imports, BOT spokeswoman Roong Mallikamas said no steps had been taken to regulate the gold market.

"In 2014, the attractiveness of gold has diminished as its price has come down from the peak. (Thais) were previously driven into gold to seek higher returns, and now they are no longer expecting highly attractive gains from buying gold," Roong said.

(Additional reporting by Orathai Sriring in Bangkok; Editing by Joseph Radford)

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