Impact of gold prices on baht monitored

Wed July 16 2025

The Bank of Thailand and the Ministry of Finance are discussing ways to address currency moves that are not aligned with fundamental factors, including the impact of gold prices, according to a deputy governor.

Gold prices are among the non-fundamental factors affecting the baht’s movement and authorities are looking at ways to reduce the correlation between the two, Roong Mallikamas said in an interview. She declined to say what steps were being planned or how soon they will be announced.

“The baht should act as a shock absorber and not a shock amplifier,” Ms Roong, one of two contenders for the governor’s position, said on Tuesday. “So, definitely things that are non-fundamental should be addressed.”

The Thai baht typically gets a boost when Thais sell gold, which is highly valued as an investment, as the dollar proceeds get converted into the local currency. The baht surged about 11% over the past year, making it one of Asia’s best performing currencies, while gold climbed to a record in April.

The baht has a much closer link to gold than other emerging Asian currencies do, with the two prices having a correlation coefficient of about 0.53 over the past 90 days. A coefficient of 1 would mean they are moving in lockstep.

A strong baht is adding to risks to the Thai economy, which is already facing the threat of a punitive 36% US tariff on its exports. The rally has led some ministers and business groups to urge the central bank to weaken the currency to support exports and tourism, the nation’s key growth drivers.

The Bank of Thailand has said it doesn’t target any particular level or direction for the baht and its gain over the past year is in line with regional peers.

Ms Roong said the baht’s outperformance over the dollar index and its high correlation to gold is something the central bank has noticed and trying to address.

“We don’t try to stop people from being interested in gold, but we want them to do it in such a way that it doesn’t affect the volatility of the baht or make the baht have higher correlation” with gold, she said.

Source: https://www.bangkokpost.com/