Bank of Thailand: Gold trading restrictions have weakened gold’s impact on the baht and may be further tightened

(1) In March, the Bank of Thailand set a daily online gold trading limit of 50 million baht per person and encouraged larger investors to settle transactions in US dollars instead of baht. Governor Sethaput stated that, if necessary, this cap could be further reduced to 30 million baht or even lower. (2) The measure is weakening the correlation between the baht and gold. The 60-day correlation coefficient between the baht and gold prices has dropped from a peak of 0.85 last year to 0.3 in April, reaching its lowest level in four years. (3) Further review and future direction: The central bank is strengthening its scrutiny of gold trading. Since requiring the declaration of physical gold withdrawals exceeding 2 kilograms, the withdrawal volume has decreased by about 70%. At the same time, controls have been tightened on cash payments for gold purchases exceeding 10 million baht, as well as cash deposits or exchanges exceeding 5 million baht. Sethaput also supports the Ministry of Finance's proposal to tax certain gold transactions (provided the tax rate is low enough not to burden legitimate businesses and consumers) to improve transparency.