The Commerce Ministry dusted off a plan to register gold shops nationwide with the Internal Trade Department in a fresh move to curb speculative trading.
Deputy Commerce Minister Yanyong Phuangrach said on Monday that registration would enable the authorities to closely monitor the country's gold trading transactions, particularly for proliferating online gold speculation and gold trading in the form of promissory notes in lieu of actual gold delivery.
Gold transactions are valued around 1 trillion baht per annum, well above the gold import value of about 300 billion baht.
Through closer monitoring, consumers would be better protected, he said, citing the situation in India.
India's government and central bank have taken several steps this year to stem the flow of gold into the country, including imposing a record 10% duty on imports, to help reduce the current account gap.
Asia's third-largest economy has been struggling with a slowdown, a slump in the value of its currency and a widening current account deficit.
India has the world's third-largest current account deficit of around US$90 billion, primarily due to its ever-rising oil and gold import bills.
"The country's overall gold trading, be it in the form of gold ornaments and gold bars, has surged substantially over the past several years while gold trading is closely interconnected with foreign trading, easily bringing about price swings," he said. "The move will help ensure better standards in gold trading."
Currently, there are about 7,500 gold outlets and online gold traders, but only 900 of them are registered members of the Gold Traders Association. Through registration with the Internal Trade Department, gold shops are required to inform the department every time they adjust their prices as well as declare the goldsmith's charge for gold ornaments.
Under the requirement based on the announcement of the Central Commission on Prices of Goods and Services (CCP) about the fair practices of gold traders in 2009 , gold traders are also required to separate personal gold trading accounts from business-purpose trading ones.
"The central bank is currently working on a new regime on gold trading to put it on par with other financial sectors," said Mr Yanyong. "The new regime is expected to be announced in the foreseeable future."
Somchart Sroythong, director-general of the Internal Trade Department, said the new move aims mainly to protect retail gold investors who may be subject to cheating.
More importantly, the gold prices are highly volatile, he added.
Meanwhile, gold traders welcome the policy, saying registration is another safety net to protect consumers from illicit gold traders.
"This is actually the Gold Traders Association's idea. We proposed it two years ago," said Jitti Tangsithpakdi, chairman of the association.
He said even though the association helps regulate members and some traders in line with the Securities and Exchange Commission law, there are quite a few traders who operate quite freely with no one to control their transactions.
The Bank of Thailand last month found the value of foreign exchange transactions for gold trading was greater than actual gold imports and export value, indicating that some gold dealers might speculated on foreign exchange rates through spot gold trading.
"I think this issue is very complex and we have to be cautious in our inspection to determine whether it is really related to the foreign exchange speculation or not. We'll discuss the matter with the commerce ministry, central bank and commercial banks," said Mr Jitti.
Kritcharat Hirunyasiri, CEO of MTS Gold Group, agreed with the idea in principle, adding that gold shops would likely cooperate with the government.
However, he pointed out gold traders' registration, exchange rate speculation and online gold trading are separate issues. "They should be dealt with separately," said Mr Kritcharat.
"The registration would bring gold traders into the government's database so authorities can regulate their activities. It can be done over the next three weeks," said Mr Kritcharat.
"But detecting exchange rate speculation is a different story. It's hard to monitor all transactions since there are several small independent traders."