The nosediving gold price - currently US$1,220 to $1,270 an ounce, down from last September's peak of $1,920 - is compelling at least 75% of investors in local gold futures to shy away from the market.
Open interest in gold futures has declined to 2,000 contracts a day from more than 10,000 in recent years, said Warawoot Benjaputtarug, the managing director of GT Wealth Management, one of six gold trading members of the Thailand Futures Exchange (TFEX).
More importantly, up to 80% of those contracts are from brokers' proprietary trading, he said. Most Thai investors try their hand only in bullish markets.
In gold futures, most investors earned a big profit in recent years from taking a long position in the market, as the price of the metal soared amid economic setbacks in the US and euro zone.
But economic conditions in the West are improving, leading to an appreciation in Western currencies and a sharp decline in gold prices. Global investors have shifted from safe-haven assets such as gold into riskier assets such as stocks, but Thais have not adjusted their positions, said Mr Warawoot.
"Thai investors have no skill in making a profit during a bear market," he said.
Gold and SET50 index futures were the most active contracts on the TFEX over the past two years, but now SET50 index futures and single-stock futures are the most active.
Some 2,000 contracts of gold futures are changing hands each day compared with 70,000 contracts overall on the TFEX.
"When gold futures have thin trading volume, the risk of investing in gold futures increases, as investors who can access price information can control the market, driving those with small trading volume into a corner," said Mr Warawoot.
GT Wealth Management will shift its focus to other derivatives products with the aim of maintaining a market share on the TFEX of 1%, the level at which the firm breaks even.
The Gold Research Center yesterday said the consensus second-half forecast of the six leading gold traders is a range of $1,300 to $1,400 an ounce.
Kamoltun Pornphaisarnvichit, the centre's research head, said factors affecting gold prices include the US Federal Reserve's planned stimulus curb, the baht's direction, the movement of large gold funds, the Asian economic slowdown and market speculation.
He said gold prices this month are expected to move in a range of $1,150 to $1,300 an ounce, with the price of local gold with 96.5% purity moving between 17,000 and 20,500 baht per baht-weight.
Local spot prices yesterday were 18,250 baht per baht-weight for bullion bought by gold shops and 18,350 baht per baht-weight for bullion sold by gold shops, down from 18,400 and 18,500, respectively, on Thursday.
About the author
- Writer: Nuntawun Polkuamdee
Position: Business Reporter