Thai authorities are escalating efforts to regulate the gold market, targeting illicit financial flows and the metal's influence on the baht. In March, the Bank of Thailand (BOT) implemented a daily limit of 50 million baht (approximately $1.5 million) on online gold trading per person, encouraging larger investors to use U.S. dollars instead of baht for transactions. Governor Vitai Ratanakorn stated this cap could be lowered to 30 million baht or less if necessary, indicating the central bank now possesses the tools to tighten these restrictions further.
The measures appear to be working, as the 60-day correlation between the baht and gold prices dropped to 0.3 in April, a four-year low, from a peak of 0.85 the previous year. This weakening relationship helps the BOT manage the currency, as surging gold prices previously amplified currency swings, leading to the baht's appreciation and potentially harming Thailand's export and tourism industries. The BOT is also increasing scrutiny on gold transactions as part of a broader crackdown on illicit financial activities, noting a 70% decrease in physical gold withdrawals exceeding 2 kilograms since reporting requirements were introduced.
Furthermore, authorities are tightening controls on cash payments for gold purchases exceeding 10 million baht and on cash deposits or exchanges above 5 million baht, with Governor Vitai noting that such large cash transactions are suspicious. The Finance Ministry is also considering a tax on some gold transactions to improve transparency and track financial flows, with Vitai supporting the initiative provided the levy is low and doesn't burden legitimate businesses. This tax is aimed at identifying who is buying and selling gold, as officials believe illicit money flows through this channel and effective tracking is crucial to prevention. The specific business tax will apply to purchases of gold without physical delivery, both on platforms and in paper-based transactions.
