Tuesday, August 26, 2008

Golden moment

Golden moment

Yaowarat experiences a rush to buy as gold speculation heats up on scanty deposit rates and falling stocks, reports Woranuj Maneerungsee

Recent visitors to Bangkok's Chinatown district of Yaowarat, the centre of the gold trading business, may have witnessed the unusual sight of queues of people extending to the pavement from gold shops. Among those waiting in line last week were people carrying more than a million baht, only to be told when they finally got to the counter that the shop had run out of stocks of gold bars.

On Aug 15, for instance, the price of a gold bar fell to 12,850 baht per baht weight, the lowest in eight months.

''It was a record in my shop's four-decade history, selling about 14,000 baht weight of gold in a single day,'' said Jitti Tangsithpakdi, managing director of Jin Hua Heng gold shop in Yaowarat.

Gold buyers have been shifting to gold bars from jewellery over the past seven years. — PAWAT LAOPAISARNTAKSIN

One baht weight of 96.5% gold is equivalent to 15.244 grammes (There is also a 99.99% gold bar).

Low deposit interest rates, a sluggish stock market and the speculative attraction of a volatile gold market have been driving more and more investors to invest in the precious metal.

The price fell 2,600 baht or almost 17% in one month from the peak of 15,450 baht on July 15, says Mr Jitti.

At his shop alone, about 200 million baht in cash circulated on that day, causing gold sellers to tire from counting banknotes. Buyers are hoping prices will bounce back, he says.

This blossoming interest in gold is also changing the behaviour of people who would normally not show much interest in world affairs.

''Bush (the US president) is the reason behind the stronger dollar recently,'' said Ladda Wachiradhamporn, 52, the owner of a small transport firm in Yaowarat. ''That caused the gold price in the world and local market to drop over the last 10 days.''

She is half right. The appreciation of the US dollar recently was caused by hedge funds selling gold to buy cheap stocks and dollars as the US economic recession deepens.

Since Mrs Ladda shifted her investment to gold five months ago, world news has become her favourite programme instead of soap operas.

However, she missed the chance to profit from a 400-baht-increase in gold bar prices last Wednesday, blaming one local analyst who predicted the market would fall.

''He said on TV that should owners wait for a while since the gold price would fall again,'' says Mrs Ladda, who was peeved.

She has purchased about 400 baht weight in bars so far, making 100,000 baht in profit from selling 280 baht of gold.

Mr Jitti says gold buyers have been changing their behaviour toward gold bars from jewellery over the past seven years. They have also changed their priority from saving to investment and speculation due to an annual increase of 8-10% in gold prices. This year, the price has jumped by 30% so far, attracting more investors and speculators.

Sales of gold bars make up 80% of the country's gold trading currently, up from 20% seven years ago.

A volatile gold market attracts the most buyers, he said. Once it rose by US$40 in one day, which is extraordinary, he said. He earlier predicted gold prices would drop by the end of this year, but the fall came sooner.

''A 30% increase in a single day means a very serious situation happened, like the World Trade Center collapse in 2001,'' he said, adding hedge funds can manipulate the gold market the same as other commodities. Gold market volatility can be risky too, and he suggests buying only for risk diversification rather than speculation.

As a businessman, however, he cannot resist high demand. Earlier this year, his shop introduced smaller gold bars for the first time to serve buyers without much money. It launched a 50-satang gold bar (7.622 grammes), a one-baht (15.244) and a two-baht one. Usually a five-baht weight is the minimum and 100-baht weight the maximum.

The response was better than expected, said Mr Jitti.

Nongluck Juengteerapanich, 35, runs a small refreshment business and decided to invest in gold bars this year because of the convenience of ordering by phone. She transferred a 10% payment through a bank immediately after ordering and the rest in the next two days. She can collect the precious metal or deposit the gold. That helps her save time and avoid traffic in Chinatown.

She realises the risk, but believes gold is still worth owning. If the price does not move significantly for months, she will keep her purchase.

''As we have learned since we were young, the gold price will never fall. The longer the time, the higher the price. I am prepared for a long-term investment,'' she said.

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