By Sarun
Kijvasin, Suphannee Pootpisut, and Wichit Chaitrong
The Nation, Bangkok, Thailand
Monday, September 23, 2013
http://www.nationmultimedia.com/business/BOT-will-regulate-gold-trading-...
The Bank of Thailand is
looking to regulate gold trading, as it suspects gold imports have been used
to speculate on exchange rates. The central bank also want
to protect retail investors who buy gold-linked financial papers.
"The Bank of
Thailand has been consulting with the Finance Ministry and the Securities and
Exchange Commission on how to regulate trading of gold-forward contracts in
order to make them transparent and protect the interests of ordinary
investors," BoT Governor Prasarn
Trairatvorakul said.
He added that the BOT
wanted gold brokers and traders to disclose information about their
transactions outside the Thai bourse's futures exchange.
The central bank has
detected unusual gold imports that may be linked to currency speculation, he
said.
"We have found substantial discrepancies between values in US dollars
and the volume of gold imports."
The central bank has come
under pressure this year because of the high volatility of the dollar/baht
exchange rate. At the same time, gold prices have also experienced high
fluctuation, both globally and locally.
Gold importers can
acquire unlimited amounts of dollars to fund their trades, but those wanting
to buy foreign currency without any underlying business need permission from
the central bank, Prasarn said.
While Thai jewellery manufacturers may not be involved in currency
speculation, some importers could be using gold imports to cover up their
speculative activities, he said.
Previously, central bank
officials met with gold traders to discuss sharing information about their
market activities, he said.
The governor is also
concerned about the transactions of gold-linked papers, especially forward
contracts transacted outside Thailand Futures Exchange. Some operators could
be selling gold papers online to retail investors and taking advantage of
their customers, he said.
"We don't worry
about gold futures trading, since it is under supervision by the authorities.
However, nobody looks after gold forward contracts."
Asked whether the
authority may impose some measures to limit imports of gold as the Indian
government does to address its current-account deficit, Prasarn
replied that it was not necessary.
Currently, the Thai
government does not collect tariffs on gold imports, and it also waives the
7-per-cent value-added tax for registered jewellery
manufacturers.
Gold imports in the first
seven months of this year were worth US$10.86 billion (Bt337 billion), or
8.28 per cent of total import value.
Thailand ran a
current-account deficit of 0.2 per cent of gross domestic product in the
second quarter but if gold imports were excluded, the current account would
have been in surplus. But Prasarn does not see gold
import as a threat to the current-account balance.
On the outlook for
interest rates, the BOT governor said they could remain lower than in the
past, since central banks around the world, particularly the US Federal
Reserve, have injected massive amounts of liquidity into the market and kept
policy rates extremely low.
"In the future, the
rates may move to a new normal that will be lower than past levels."
He noted that even if the
US economy recovers fully, the nominal interest rate could end up around 2
percentage points lower than before the 2008 crisis, when the benchmark
10-year US Treasury yield was about 4-5 per cent per annum.
For Thailand, the current
policy rate of 2.5 per cent is accommodative for economic growth, he added.
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