Singapore Bullion Market Association

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Thailand’s Crucial Role in the ASEAN Gold Market

By Nuttapong Hirunyasiri, CEO, MTS Gold Group

Published on April 10, 2021

Walking down Yaowarat Road in Bangkok, the streets are bustling with snaking queues outside the numerous bullion shops in the area. Gold shops and goldsmiths are found across the country and span family-run stores to large chains. Thailand is the largest OTC physical gold trading market in Southeast Asia, after China and India.

Gold is intrinsic to Thai culture and it is gifted during weddings, birth, and other religious events. It is often held as an investment in the form of jewellery, bars and coins. Over the years, the Thai bullion market has evolved to be one of the most sophisticated in the ASEAN region, complete with exchange-traded gold futures, OTC spot, and physical. These products are actively traded and contribute to the vibrancy and competitiveness of the Thai bullion market.

Gold bullion is the bread and butter of Thai gold traders, and contributes much to the Thai economy in the form of savings and stored value. During times of crisis, gold has been the last-resort resource for many locals, who have had to sell their gold for cash to survive. Coupled with volatility and gold prices hitting an all-time high of US$2,050/oz., there has been a large rush to liquidate this asset in the past year, resulting in a copious volume of scrap and physical selling.

The total physical investment demand in Thailand in 2020 was 300 tonnes, with a total export value worth US$13 billion. The top three Thai bullion houses alone contributed almost 10% of total Thai exports in the last year. As in many other countries during the pandemic, local jewellery demand has dropped significantly, and sales at many jewellery stores have plunged by at least 30% to 40% as lockdowns curtailed trading.

Gold’s supply chain was also affected, with fewer international flights and limited cargo capacity. Amid COVID-19, logistics planning and flight management has become a key challenge for Thai bullion traders. Thai Airways – one of the country’s major carriers – filed for bankruptcy and ceased all flights in and out of Bangkok. Flights are limited, and the cost of transport has almost tripled.

While economic recovery is expected in 2021, it is still extremely challenging for Thai bullion traders as flights have not fully resumed and the major airlines are still undergoing restructuring. We believe the Thai market demand will remain strong and competitive, coupled with continual high volumes, albeit with lower margins.

MTS Gold (MTS) is at the forefront as one of Thailand’s largest precious metals importer and exporter. And we continue to lead with a strong suite of physical and financial trading capabilities, which includes a world-class refinery, an established Global Futures and Loco London spot trading infrastructure.

Locally, MTS has been a pioneer in Thailand, and our efforts have helped the Thai Futures Exchange’s Gold Futures contract to become the fifth largest gold futures trading contract in the world, and the exchange to have the largest volume of gold futures contracts in ASEAN. We have received many awards from TFEX for our contributions and efforts.

Globally, MTS is the first Chicago Mercantile Exchange (CME) trading member to facilitate CME Gold Futures in Thailand. As a leading member on the Shanghai Gold Exchange International (SGEI) board, we have received an outstanding international member award, and co-partnered with SGE in its Gold Belt and Road initiative, innovating gold leasing and realising a new business model with SGE in China.

MTS endeavours to be an integral member on the ASEAN gold belt. We seek to connect the bullion market, across physical, OTC and exchange-traded markets, whilst using Singapore as central hub. In the past five years, MTS Gold has been a key member in contributing to Singapore’s gold ecosystem with our regional office in Singapore facilitating collaborations with SBMA, Enterprise Singapore (ESG) and other global counterparts in establishing Thailand and Singapore into one of ASEAN’s most vibrant and centralised gold trading hubs, as we further drive liquidity in these markets.

With Singapore’s efficient financial infrastructure and strategic location, it is an ideal centralised trading and logistics hub. This has proven vital, especially during COVID-19, where flight routes out of Bangkok were disrupted and regional and global trade continued. SBMA and ESG’s efforts to build Singapore’s gold ecosystem the last eight years has revealed Singapore’s true potential and is reflected through the large volumes of ASEAN gold that rely on its robust infrastructure to reach global markets.

MTS looks forward in supporting the further centralisation and establishment of Singapore as a leading gold hub in Asia.

NUTTAPONG HIRUNYASIRI is the CEO of MTS Gold Group, one of Thailand’s top 10 companies and top 3 bullion companies. He started MTS Gold Group’s first overseas office in Singapore and has been expanding the group business internationally. He focuses on product development and innovation for gold investment, with the aim of being a leader in providing the full suite of gold investment services in the ASEAN region.