Rush to sell gold leads to dire liquidity crunch at shops

As gold prices held steady this morning (15.4.2020) after hitting an over seven-year high the previous session, Thai gold shops are in a bad shape as the flood of sellers have led to liquidity problems with some pondering temporary shut down or asking their clients to accept payment at a later date, Jitti Tangsitpakdi, Chairman of the Gold Traders Association was quoted as saying by Rakha Thong Kham Wan Nee website.

Spot gold was trading at $1,727.59 per ounce, as of 0042 GMT, having touched its highest since Nov. 2012 at $1,746.50 in the previous session. U.S. gold futures fell 0.9% to $1,752.20 an ounce, according to a CNBC report.

The retreat from riskier assets followed the International Monetary Fund’s prediction on Tuesday that the global economy may shrink by 3% in 2020 due to the virus outbreak, in the worst downturn since the Great Depression of the 1930s.

The contagion, which has infected more than 1.9 million people globally and killed 120,670, has forced countries to shut activity and prompted central banks to unleash support measures.

Gold Traders Association announced today gold prices at 10.30 a.m., adjusted for the third time since morning, quoting buying price of one baht weight gold bar at 25,800.00 and selling price  26,000.00 baht.

Meanwhile buying price of ornament gold was set at 25,332.36 baht while selling price 26,000.00 baht.

The association mentioned that Thai baht currency streghtened this morning which affect gold prices, which fluctuated times yesterday and rise by 400 baht.

Adding to the liquidity problem of Thai gold businesses is that exporters have not been able to sell gold overseas being hampered by many countries having locked down and airlines halting flights.

“In the 60 years I have been in the gold trade this is first time I have run into this type of problem. It’s very tiring because gold shops only have gold, not money, with 99% of the people now bringing gold to sell and there are practically no buyers.

“If compared to a bank it’s like a run with people only withdrawing money from accounts – which is terrible.

“Among just the gold shops in Yawaraj area,  people have sold gold up to to the tune of 1 billion baht a day and I believe in two to three days’ time it will reach 10 billion baht.

“Even if bank notes could be printed it would not be compelted on time.

“So far the basic solution is to borrow more from financial institutions (banks) to use as liquidity and quickly selling gold to those countries where it is still possible to do so,” Mr Jitti said.

He added that some shops now have no way out aside from shutting down temporarily or negotiating with  customers to accept payment later.

Meanwhle Dr. Kritcharat Hirunyasiri, Chairman of Executive Board of MTS Gold which is one of Thailand’s big gold exporters, said right now not only have flights halted some countries that are a source of gold, such as Singapore, Australia and Switzerland, have shut their factories and countries so no gold is being sent out for an extended period leading to liquidity evaporating and everyone in the industry facing the same problem in a chain reaction.

While his company is a big exporter and is not yet facing liquidity problem like some gold shops it is nevertheless still facing tightness and is now taking seven to 15 days to pay customers, with the soonest being seven days and the latest one month.

Hua Seng Heng’s analysis of gold price trends foresees a mmove move sideways up after breaking through the key resistance of $ 1,700 and weak US economic data helped support these prices. The first resistance IS around the $ 1,750 an ounce and the next one at the $ 1,770, while the support is around $1,700.


An historic gold coin on display at Magyar Nemzeti Múzeum in Budapest. Photo: Bobo Boom (CC BY 2.0)


TNR staff
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