Traders are predicting that domestic gold prices, which reached a peak of 34,550 baht per baht-weight during the Chinese New Year, will experience an uptrend again in May. This shift is expected to occur as the Federal Reserve is anticipated to begin cutting US interest rates, leading to global prices hitting US$2,100 per ounce.
According to Jitti Tangsitphakdee, president of the Gold Traders Association, domestic gold prices have currently decreased by 300 baht from the Lunar New Year peak, in line with the drop in global prices to $2,019. It is predicted that the expected US policy rate cut of 0.25% in May will result in a clear increase in domestic gold prices. Additionally, the Fed is expected to further reduce the rate at least twice this year, potentially leading to a 0.5% decrease in US rates.
Jitti Tangsitphakdee foresees that once the Fed begins cutting the rates, gold prices will stabilize at $2,100 per ounce with a support level at $1,975. Looking into the future, he anticipates that domestic gold prices could even reach 40,000 baht per baht-weight, although not within the current year.
Kritrat Hiranyasiri, chairman of MTS Gold, shares this view, stating that global gold prices are likely to remain steady in March and April after trading in a range of $2,000-2,045 per ounce recently. He also predicts that the Fed will cut the rate in May or June at the soonest, as opposed to the earlier forecast of March.
Shaokai Fan, head of Asia-Pacific (ex-China) and global head of central banks at the World Gold Council, points out that if the US experiences a soft landing as many analysts predict, gold demand is expected to remain strong due to the decreased opportunity cost of holding gold. Additionally, continued central bank buying and strong retail demand in many key markets should provide support for gold demand.
In China, despite a slowing economy, gold demand remained robust in 2023, with jewellery demand rising by 10% year-on-year and retail investment demand increasing by 28%. The weak property and equity markets prompted investors to seek alternative opportunities, resulting in gold benefiting as a safe-haven asset.
Looking ahead, the intensifying geopolitical tensions will likely continue to influence gold’s performance as a safe-haven asset in 2024. Despite a 2% decrease in gold jewelry demand in Thailand in 2023, gold investment demand remained strong, rising by 13%, indicating the resilience of gold as an investment asset in uncertain economic times.
