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Gold poised to break US$2,000 barrier

YLG Bullion International, Thailand’s largest wholesale gold trader, has revised up its gold price projection to between US$2,000 and $2,200 an ounce this year due to the slower-than-expected global economic recovery, especially with EU economies looking set to take another two years.

The price will also show a significant increase at the end of each quarter from central bank management of its reserves.

Vice-president Pawan Nawawattanasub said investment demand for gold has increased dramatically, resulting in a 27% boost in the price year-to-date, making it the highest-paying commodity.

The price has jumped six times this year, each time by between $100 and $200, on Middle East violence and US and EU economic problems.

Mrs Pawan said the precious metal is now in a correction period, with the appropriate level ranging from US$1,700 to $1,950 an ounce.

“Gold will remain very volatile for the rest of this year,” she said.

Factors supporting the gold price in the medium- to long-term include the weak US economy causing depreciation of the dollar, resulting in other countries shifting their reserves to gold.

The EU debt crisis spreading from the PIIGS (Portugal, Ireland, Italy, Greek, and Spain) countries is another one.

“We expect gold will rise further and reach $2,000 to $2,200 an ounce or 28,000 to 30,000 baht per baht-weight [at 96.5% purity]. However, investors should monitor the situation closely, as the price will react in line with economic data soon to be released by the US Federal Reserve. The Fed will also likely announce a stimulus package soon,” said Mrs Pawan.

She said the amount of gold traded through YLG in the first eight months had doubled year-on-year to 250 billion baht.

The company’s trade represents about half the overall market.

Hedge funds are also paying much more attention to gold as well as central banks and other investors worldwide.

YLG’s client accounts have also increased to more than 1,000 from 250 early this year.

YLG has revised up its full-year trading target to 400 billion from 300 billion baht in line with increases in the gold price.

“Gold has gained very much in popularity and not only among Thai investors. We’re seeing customers from Laos, Cambodia and Burma,” said Mrs Pawan.

YLG will open it first branch in Vientiane this year as a step to the company becoming the centre of the Southeast Asian gold trade.

“The cost to gold miners has also jumped to $780 an ounce. That also supports the gold price, so it is an easy correction. Investors should exercise discipline in their investments, setting a level at which they can cut their losses if need be,” said Mrs Pawan.

Tipa Nawawattanasub, the chief executive of YLG Bullion & Futures, said night trading sessions (7.30-10.30pm) in gold futures have become very active, more so than daily trading.

Gold futures trading by Ms Tipa’s company in the first eight months grew in line with the target at 393,450 contracts, up by 15% year-on-year.

The company has revised up its full-year trading growth target to 20% from 15% due to the increase in the customer base to 2,000 accounts from 1,100 early this year.

Source: Bangkok Post

ThaiVest Editorial Team

1 Comment

  • All this rise in gold prices seems to be fear driven. A new gold standard does not make sense, even if the world bank president appears to consider that a viable option. Gold may rise a little further, but the downside risk does not justify investing in Gold. But maybe that is only me 🙂

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