BOT to meet gold traders next week on ‘strong baht’ measures

Chayawadee Chai-anant, Assistant Governor for Corporate Relations, said the central bank has been holding intensive discussions with relevant agencies and gold traders to lessen the strong correlation between gold prices and the baht. 

The next round of talks will consolidate data and determine appropriate measures.

Measures under review include:

• Promoting gold trading in US dollars to lower transaction costs.
• Improving monitoring of gold shop data and trading behaviour.
• Considering tax measures, though these carry significant side effects and require careful study.

“If the baht strengthens excessively, tax measures may need to be considered to ease pressure and reduce volatility linked to gold prices,” Chayawadee said.

Given that such measures cannot directly curb the baht’s appreciation, she stressed that the central bank must design policies based on comprehensive data. “We need to listen carefully and address the root cause,” she said.

Pawinee Chitmongkolsamur, Senior Director of the BOT’s Financial Markets Department, said the recent baht appreciation has been driven mainly by the weakening US dollar, which has fallen nearly 10% year-to-date on expectations of looser US monetary policy. This has strengthened regional currencies, with the baht outperforming peers.

Pawinee outlined three factors behind the baht’s stronger rise compared with neighbouring currencies:

• A better-than-expected current account balance.
• Rapid political stabilisation in Thailand.
• A surge in global gold prices, up more than 40% this year.

“Thais tend to trade gold heavily. When prices rise, they sell to take profit. Gold shops then sell abroad, receive dollars and convert them into baht to pay customers. This cycle amplifies the baht’s volatility and strengthens it more than other currencies,” Pawinee explained.