Bloomberg reported that the Bank of Thailand and the Ministry of Finance are in talks over a potential new tax on online gold trading conducted in Thai baht, with possible exemption on gold traded in US dollars, future exchanges, or purchases from ordinary bullion shops. The purpose of this is to slow down the gold export, leading to an appreciation of Thai currency.
The finance ministry will later hold more meetings with the central bank and should make a decision after the new administration takes office. There is also a speculation that the tax will be categorized as specific business tax since 70% of gold purchase in Thailand was made on online platforms, according to MTS Gold Group.
On Monday, the central bank’s official invited gold traders to discuss the effect of gold trading on Thai currency and the strict measures for reporting transactions. Ms. Pimpan Charoenkwan, Assistant Governor for Financial Markets Group from the central bank, stated after the discussion that since the beginning of this year, Thai baht strengthened by 7%, ahead of regional peers, due to a current account surplus that surpassed the forecast and the continuing increase of gold price.
Among the invited guests are the representatives from the Thai Gold Traders Association, who proposed a measure that could encourage more domestic gold trading into US dollars as a solution to minimize the effect. Meanwhile, the central bank also urged gold traders to raise their surveillance on gold trading in Thai baht, especially the behaviour of the investors as it can affect Thai currency, and caution them to not let transactions be associated with any illegal activities.
Later in the evening, the baht weakened by about 0.5% to 31.83 against the U.S. dollar, the most since July 31, while the nation’s gold export in the first seven months of the year rose to THB 254 billion, or USD 8 billion, an increase of 69% YoY. There is also an unusual uptick in the gold export to Cambodia, leading to a call for an inspection. Additionally, gold prices in the global market also surged by about 40% this year.
As for domestic gold price, its closing price rose from THB 54,600 on Friday to THB 54,800, according to the association’s website. Mr. Nuttawut Wongyaowarak, President for Research at Globlex Securities, stated that it was due to the depreciation of Thai baht following the news of the tax on online domestic gold trading. Nonetheless, he estimated that the gold price would continue to increase.
After passing the rate of USD 3,500, the global gold price is still responding well to the positive news. Mr. Nuttawut expected that the price would move sideways up despite a report that the Federal Reserve may cut the interest rate by only 0.25 percentage points. Additionally, he also estimated that the domestic gold price would reach THB 56,000 – 57,000 due to the baht depreciation.
