Gold prices should remain volatile in the short term amid the strengthening US dollar and rising interest rates, but the outlook is positive as investors buy gold to hedge against uncertainties in the global financial market, say the World Gold Council.
Gold prices edged up on Tuesday from the lowest level in more than two years as the dollar's rally paused amid concerns over further policy tightening by the US Federal Reserve to quell soaring inflation.
Spot gold climbed 0.6% to US$1,631 an ounce after hitting the lowest level since April 2020 at $1,620.20 Monday.
Jaspar Crawley, the council's head of institutional sales for APAC excluding China, said on Tuesday headwinds for gold are the strengthening dollar and rising interest rates, while tailwinds are huge uncertainties in the global financial market and the size of government debt.
Gold is still performing very well this year while equities and bonds, both of which are core assets for investors all over the world, are down this year, he said.
"The big reason investors buy gold, at least on the institutional side, is diversification, and for this gold works very well this year. If you are looking for diversification, you probably look to gold, which has actually gone up against the euro, the pound and the baht," said Mr Crawley.
Andrew Naylor, the council's regional chief executive for APAC excluding China, said research shows a significant recovery of gold demand in Thailand.
"This region is performing better than the rest of the world if you look at economic growth. That will underpin consumer demand for gold as well," said Mr Naylor.
"One of the major concerns consumers have is protecting wealth, particularly amid high inflation, and gold can be an effective hedge against inflation in all major inflation scenarios, combined with uncertainties on the horizon."
He said Thailand is one of the largest consumer markets for gold in Southeast Asia with a market size of 45 tonnes a year, twice the size of the Australian market.
"Thailand has a large and vibrant gold market. Almost half of retail investors in Thailand hold gold and gold is the second most popular investment in Thailand," he explained as the council launched its latest "Retail Gold Insights" report on Tuesday.
Representing the opinion of 2,000 active retail investors across the country, the Thai chapter was conducted in 2021 as part of the council's research programme, which surveyed more than 12,000 active retail investors across six countries including China, the US, India and Germany.
"Our report demonstrates why gold has a broad appeal across different types of investors in Thailand, with a key driver being gold's role as a safeguard against political and economic uncertainties," Mr Naylor said.
The report reveals that Thai investors are savvy and engaged with a maximum of 35% of their income invested across an average of 3.5 investment products.
Half of retail investors own some form of gold and risk reduction is the main factor prompting investors to invest in gold. Gold bars are the most popular method of investing in gold, followed by gold coins, ETFs, vaulted gold and gold jewellery.
Interestingly, women are much more engaged with gold than men, particularly for long-term investment.
