The highly volatile price swings of gold, which is impacting many Thais obsessed with the yellow metal, has forced the Bank of Thailand (BOT) to step in to regulate the large volume of trading affecting the baht’s rate.
The price of spot gold in the global market has swung widely up and down since early this year, following a 64 per cent rise last year.
Local spot gold has moved in line with the global market, crossing over 82,000 baht per baht weight (around 15.2 grams) on January 29.
The price of gold dropped on February 6, closing at around 72,000 baht, according to the Gold Traders Association of Thailand.
Impact on the baht
The large volume of gold trade and price volatility has impacted the value of the baht. The Thai currency appreciates when gold prices rise sharply.
According to the World Gold Council, Thailand in 2025 saw the highest annual investment since 2018, with the value reaching a 12-year high of US$6 billion (189.2 billion baht).
Even so, this somewhat understates the strength of retail interest; a shift towards online account trading was noted during the year, which diverted some demand away from physical retail products.
The local industry estimates that 70 per cent of gold transactions have been made online in recent years due to widespread adoption of online applications.
The BOT also holds a high proportion of gold in its international reserves, with gold reserves at 234.52 tonnes compared with Singapore’s 193.56 tonnes and South Korea’s 104.45 tonnes last year, according to World Gold Council statistics.
Wider implications for the economy
The movement of gold prices has affected not only individual Thai investors who are gold traders but also the wider economy as the baht’s value has implications for Thai exports.
A stronger baht erodes Thailand’s competitiveness. As gold prices rise, the baht can appreciate disproportionately, prompting the BOT to implement stricter regulations.
Starting March 1, 2026 the BOT will cap online gold trading in Thai baht at 50 million baht per person per day.
These measures are designed to curb the rapid appreciation of the baht, as high volumes of gold trading have been identified among key drivers of currency volatility, apart from the weaker US dollar.
New gold trading regulations
- Online gold trading via apps in Thai baht is capped at 50 million baht per person per day.
- Transactions exceeding this limit require prior approval from the BOT.
- The new rules prohibit short-selling, require full payment upfront, and stop “net settlement” (where only the price difference is exchanged).
- Gold traders must report transactions of 20 million baht or more to the BOT.
- The restrictions do not apply to physical gold transactions at stores, gold savings platforms that only allow purchases, or trading on the Thailand Futures Exchange (TFEX).
- Those holding more than 50 million baht in gold before January 31, 2026, can sell their holdings without being subject to the new daily limits.
Efforts to lower impact on baht
The BOT is taking these actions because when gold prices rise, Thai investors often sell in large volumes, forcing gold shops to sell US dollars and buy baht, which causes the baht to strengthen rapidly.
By curbing online gold trading, the BOT aims to decrease the rapid conversion of dollars into baht, reducing upward pressure on the currency.
The measures aim to stabilize the baht, protecting export and tourism competitiveness from the negative effects of a too-strong currency.
The BOT is assessing the effectiveness of these controls and may consider implementing a gold tax if further measures are needed.
The BOT is also working to restrict the use of third-party accounts and non-transparent, large-scale digital trading that contributes to volatility.
Mixed reactions to the BOT’s move
Critics are cautious about the effectiveness of the BOT’s measures.
Kobsidthi Silpachai, head of Capital Markets Research at Kasikornbank, said that these regulatory changes were a form of “moral suasion” or verbal intervention.
“It is intended to discourage the long-held belief/speculative trades that when the gold price rises, the baht strengthens. These measures may discourage onshore trades, but may not be able to discourage offshore trades.
The baht has become an actively traded currency offshore due to past policies (such as the ease of doing business) that liberalized the capital account.
Even after the Thai market closes, USD/THB is still actively quoted and traded in offshore markets,” he said.
Asked what affects the baht the most—gold trade or US dollar movements—he said, “The answer is both, since the prices of gold and the baht are linked to the US dollar. The market trades gold against the US dollar and the baht against the US dollar.”
When asked why Thais are so passionate about investing in gold, he replied, “I think it’s cultural. We associate wealthy people as having money and gold.”
He explained that gold shops function as financial institutions or pawn shops in rural Thailand. Gold is a portable wealth that can be used as collateral when one is short on cash.
Economically, money serves three functions: a unit of account, a medium of exchange, and a store of value.
Savers fear that paper money is doing a poor job as a store of value following the global financial crisis and central banks injecting massive funds into the market, known as quantitative easing in 2008.
Governments have lost discipline and borrowed excessively after bouts of economic and financial crises.
Kobsidthi said the baht was undergoing consolidation. US President Donald Trump and US Treasury Secretary Scott Bessent will keep the markets guessing:
Trump advocates a weak dollar to rebalance the trade deficit, while Bessent advocates a strong dollar to maintain investor confidence in US Treasuries and help fund the budget deficit.
Thailand’s election
Kobsidthi noted that the Thai general election on February 8 was putting the baht under further stress, as investors wonder how the next government would fund its growing budget deficit.
Thai bond yields are higher than the GDP forecast, which means public debt to GDP will rise. Fitch and Moody’s, two of the three major credit rating agencies, already have a negative outlook on Thailand’s sovereign credit rating. The risk of potential downgrades does not bode well for encouraging foreign direct or portfolio investments.
Advice for individual gold traders
Nada Chunsom, an economist at the National Institute of Development Administration, suggested a diversified portfolio covering equity, bonds and gold as a normal investment strategy.
However, she cautioned that the price of gold is almost always driven by demand and supply at any given time, and is hardly linked to fundamentals.
