Gold prices dance because of the Russia-Ukraine conflict
Thai actress Patcharasri Benjamas felt regretful for selling gold three weeks ago. If she had waited a little longer, she could have had more money at her hands as gold prices soared in the context of her family and people rushing to hoard this precious metal.
SCMP reported that at first, Benjamas excitedly posted her victory online because she thought she had won the grand prize when she sold 30,000 baht (895 USD)/1 baht of gold - about 15 grams of gold (equivalent to 1,790 USD/ounce). But gold prices have continued to rise, sometimes reaching $1,936/ounce.
The gold market has been dramably flooded since the Russia-Ukraine crisis began, causing inflation to increase. During the period of inflation, the value of cash decreased. Because gold is priced in USD, it will become cheaper to buy when currencies like USD depreciate. But that also leads to higher demand and therefore higher gold prices.
The shortage of oil supply from the Black Sea and the more serious disruption in the supply chain, which has been affected by the pandemic, have caused investors to flock to gold - a safe haven asset in the crisis period.
This has had a major impact on some of Asia's largest gold consuming markets, including Thailand, where investors are selling gold at high prices or buying gold to prevent inflation.
The Association of Thai Gold Traders predicts that gold prices could reach 1,970 USD/ounce if the Russia-Ukraine conflict continues.
However, according to Mr. Aat Pisanwanich, director of the International Trade Research Center at the University of the Thai Chamber of Commerce, gold investors should not sell at this time, to prevent a weakening of the currency and to ensure a possible higher price later.
If you sell gold for cash now, it will not be of much value during inflation. Depending on the development of the Russia-Ukraine crisis, for example, if there is a participation of NATO, I think the gold price in Thailand could reach 40,000 baht/1 baht of gold (equivalent to 2,380 USD/ounce) - Mr. Pisanwanich commented.
Gold fever in India
In India, gold prices also cause chaos during the wedding season. As the world's second largest gold consumer after China, the gold fever in India has no limits. In India, gold is not only a status symbol but also has religious and cultural value and is purchased for weddings, birthdays and religious rituals.
Domestic gold prices in India reached 55,500 rupees ($729) per 10 grams of gold earlier this month, near an all-time high of more than 56,000 rupees ($736) in August 2020 during a similar gold fever due to the pandemic that pushed demand up.
Pankaj Dhariya, 34, a sales employee in the northern Indian state of Uttar Pradesh, had to cancel her wedding in April because "the bride's side could not afford to buy gold mon".
My father advised the brides family to buy gold as a form of entertainment, but they said that after having to pay for food, accommodation, gifts and clothes like that, they could only afford to buy silver as a form of entertainment. Therefore, the wedding was postponed immediately" - Dhariya said.
Another 28-year-old bride, a teacher in New Delhi, was heartbroken when her mother had to sell her jewelry to buy new gold for her wedding in May.
My mother-in-law insists that we must give at least 20 grams of gold as a gift, otherwise there will be no weddings, she said.
In rural India, many people are taking advantage of the rising price of gold to sell to save their businesses on the brink of losses due to the pandemic.
Unmarried people are cautious about watching gold's fluctuations, preferring to buy when prices stabilize again. Therefore, gold traders are witnessing a decrease in demand in the context of high prices.
We have seen a steady decline in retail sales as people want to have a clear wait for prices. Young investors are rushing into gold bonds and exchange-traded funds instead of gold, said Arjun Varadaraj, managing director of NAC Jewellers, one of the largest jewelry stores in the Chennai gold center.
In New Delhi, the situation is similar. Ankit Surana, owner of Surana Jewelers, said people are worried about observing gold prices down the hall.
This is probably the worst buyback in recent history. There is panic selling... the current fluctuations in the market are similar to what we saw when the pandemic started, said Surana.
Arun Parakh, also from New Delhi, said many are doing what Sharmas mother did exchanging traditional items for expensive gold.
Due to uncertainty and high volatility in prices, people are waiting for prices to stabilize before buying new products, Parakh said.
Gold prices have fluctuated and will continue to do so. After a sharp increase when the Russia-Ukraine crisis broke out, gold prices quickly decreased following the developments of peace negotiations. Gold prices have held steady after the US Federal Reserve raised interest rates last week, despite expectations that gold prices will fall as the USD is higher.
The USD decreased slightly after the interest rate hike of the Federal Reserve.
Two days later, preventing Russia's bond payment default caused gold prices to fall.
However, despite the fluctuations, the World Gold Council predicts that inflation will continue to exist and will increase the attractiveness of gold. Gold prices are expected to continue to play a role as a diversifying material in the capital and cash markets.
"Recent events are a clear example of why gold is such an effective and well-established barrier against both unexpected and predictable risks in the market," the World Gold Council said earlier this month.
