beyondbrics

Gold demand is volatile, especially in Asia, but what on earth is happening in Thailand?

According to some numbers buried in the Thai customs website, gold imports in July, the latest month for which data is available, hit Bt55.4bn ($1.8bn), which is equivalent to a bit less than 45 tonnes and more than 13 times June imports of Bt4.1bn ($130m).

There are a few possible explanations. Thailand is a global jewellery hub – the world’s biggest cutting centre for coloured stones – but jewellery demand was significantly down in June and July.

Previous months had seen significant exports, but restocking doesn’t seem to account for the rise either. Nor does leakage into Vietnam, whose demand for the glittery stuff is immense but fairly constant.

So the numbers have got tongues wagging in Bangkok – and one player keeps being mentioned: the central bank, the Bank of Thailand.

The Thai baht is running at 13-year highs, up 8.4 per cent against dollar so far this year, which is not only worrying for exporters, but also for the Bank, which holds $157bn in foreign reserves.

The BoT won’t say how much of that is held in dollars, but a straw poll of Bangkok economists suggests that it is somewhere between 60 and 85 per cent, and they’ve already said they are trending away from the US dollar.

But if that 60-85 per cent estimate is right, every 1 per cent of appreciation in the baht is costing between $940m and $1.33bn in reserve losses on dollar holdings alone. At the top end, that’s close to 0.5 per cent of GDP, or a little more than 2 per cent of the 2010/11 budget passed last month.

So has the BoT been in the market? They aren’t saying, but the Thai Customs website might be getting a few more hits than usual in the coming weeks.

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Bangladesh splurges on IMF gold, beyondbrics