How gold fosters economic growth and prosperity
As we move into 2025, gold offers a unique opportunity to provide stability amid geopolitical uncertainties. Traditionally, gold is a symbol of prosperity and wealth in Thai culture, often used to celebrate major family milestones such as weddings, birthdays and the arrival of newborns.
As society evolves, gold remains deeply ingrained in Thai life, fuelling resilient consumer demand that recorded the highest growth among Asean countries for two consecutive quarters in 2024.
Gold can also increase a country's financial inclusion, which has become a major policy objective for governments, non-governmental organisations and international organisations across the world. Financial inclusion is often defined as allowing people to access savings products, credit, insurance and payments systems, all of which are keys for economic growth.
When individuals and households are financially secure, they are more likely to
invest in or start businesses, further supporting economic development.
The most recent World Bank Global Fidex Report from 2021 said the average bank account penetration rate in emerging markets was 71%, while 77% of people globally have access to a bank account. This is a significant improvement from 51% of people with access to banking services in 2011.
Thailand has consistently excelled in this area, with 82% of Thais having bank
accounts since 2017. By 2021, the number rose to 95.6%, with 67.1% having
savings and 92% making digital payments -- well above the averages of 82.1%,
61.4% and 78.1%, respectively, in the Asia-Pacific Economic Cooperation (Apec)
economies.
While access to bank accounts is high, there are still opportunities to broaden the range of financial services offered.
Access to credit services remains low at 30.4%, below the Apec average of 38.2%, attributed to limited understanding of credit products and fear of rejection. In 2024, informal lending surged to 30%, raising concerns as borrowers often face interest rates exceeding the legal limit of 15%.
FINANCIAL INCLUSION
Across the world there is a rapid embrace of initiatives assisting the drive for financial inclusion. Part of this is innovative financial products.
In many markets including China, Singapore, the UAE and Malaysia, retail banks are offering gold investment accounts. Turkish retail banks now offer buy-back schemes, gold bonds and gold cheques, among others.
The Thai government has shown a forward-thinking approach to digitising gold by allowing bullion traders to offer gold online savings and trading in the Pao Tang mobile app from Krungthai Bank, allowing real-time trading of 99.99% gold at global market prices.
This initiative enables more Thais to participate in gold trading and modernises the gold market. By the first quarter of 2023, the value of gold savings online rose by 60-70% year-on-year, with YLG Bullion International reporting 70% growth in new trading accounts on the Pao Tang app.
These apps demonstrate how the retail banking sector can complement the services provided by traditional bullion dealers through a network effect and an expansion of access to gold.
Can gold break down the barriers to financial inclusion? Where financial access is low, gold can fill the gap, particularly with underserved rural populations. Gold has helped rural Thais who traditionally use pawnshops to access credit to cover the cost of agricultural activities and unexpected needs.
In 2023, Thailand's Office of Government Pawnshops reported loans exceeded 20 billion baht, with gold accounting for as much as 88% of the 1.1 million pawned items.
Gold also serves as a vital safety net for Thais. During the pandemic outbreak in 2020, the gold bullion market recorded net sales of 81.5 tonnes, as households sold their gold holdings to secure much-needed financial relief.
Gold meets both financial and cultural needs, serving as a long-term store of value, an asset that is easy to buy and sell, and a protection against uncertainty. It can also directly and indirectly help governments achieve public policy objectives of maximising financial inclusion.
HIGH TRUST
In our global retail market insights research, we found 61% of consumers across the countries we studied trust gold more than currencies. Some 65% believe gold will never lose its value over the long term, and 67% view gold as a good safeguard against inflation and currency fluctuations.
By offering gold products, retail banks could expand their appeal and help strengthen the bank-to-consumer relationship.
Central banks have long recognised gold as key to strengthening proprietary balance sheets, further enhancing the attractiveness of the banking system.
Gold's enduring appeal and notable returns are particularly prominent around the New Year holiday. Data from 1971 to 2023 showed an average return of 1.79% in January alone -- almost three times the long-term monthly average.
As we begin 2025, a year that could be marked by uncertainties, gold can offer governments and individuals a financial tool that not only provides security and delivers potential returns, but also contributes to a more resilient and inclusive economy for all Thais.
Andrew Naylor is head of the Middle East and Public Policy at the World Gold Council.
Source: https://www.bangkokpost.com