Gold Still Offers High Returns

By Charoen Kittikanya, Bangkok Post, Thailand

Jan. 5–Gold remains one of the best investment choices in the coming year, given its returns of more than 10 percent annually based on the track record of the last four to five years, according to Jitti Tangsithpakdi, president of the Gold Traders’ Association.

“Gold prices swung back and forth considerably in 2006, influenced by the world events. They rose by 30 percent in the beginning of the year then dropped in the middle of the year and increased again in the fourth quarter,” said Mr Jitti.

“Despite its price swings, I still see gold as a worthwhile investment in 2007 if the price stands at slightly over 10,000 baht (per one-baht weight, or 15.16 grammes). More than that is too expensive and risky if you are not committed for long-term investment and have not invested out of your own savings.”

Gold has been rising steadily for about three years. The local price peaked in May 2006 at 13,000 baht per one-baht weight in line with world prices that reached a 26-year high of $732 per troy ounce on heavy speculation by foreign funds, which had switched from oil.

Local daily prices have been fluctuating by as much as 400 to 500 baht.

The retail prices of gold hovered between 10,450 and 10,900 baht per one-baht weight gold throughout December, a rise from 9,914.64 baht early in the year. The price closed at 10,750 baht.

Mr Jitti said the possibility remained that global gold prices could top $732 an ounce this year because of the ongoing speculation and weakness of the dollar on a mounting US trade deficit and economic slowdown.

However, he was noncommittal about the prospect of it reaching the record of $873 per ounce, which happened in 1980 after oil prices more than doubled in 1979, sparking a surge of inflation.

According to Mr Jitti, international fund managers are unlikely to stay put if the prices of the precious metal drop below their costs, as they hold lots of gold.

On top of that, European central banks under the renewed “Washington Agreement on Gold” have also pledged to limit their combined gold sales to 500 tonnes per year until 2009 to help stabilise prices.

According to Mr Jitti, the fluctuating prices, together with domestic political uncertainty and floods, hit local gold traders hard in 2006. Domestic trading dropped by 40-50 percent from a year earlier, forcing 40,000 goldsmiths out of work.

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Copyright (c) 2007, Bangkok Post, Thailand

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