Gold shops are de facto financial institutions in Thailand and generally have remained open in the country where measures taken to guard against the spread of COVID-19 have been less severe than in other countries. Long lines formed all week outside major gold shops in Chinatown in the capital Bangkok.
The sell-off has some gold shop owners claiming they are facing a liquidity crunch, leaving them short on cash to continue purchasing.
They are unable to carry out their normal practice of quickly reselling the gold abroad because of the greatly reduced number of flights to ship the gold and a shortage of buyers in other countries, who are restricted by lockdown orders and market closures.
Jitti Tangsithpakdi, chairman of the Gold Traders Association and owner of Chin Hua Heng Goldsmith Co, told The Associated Press that more than 90% of recent gold shop customers are sellers.
Shops are bound by tradition to buy back the products they sell. Prices are fixed by an industry association.
“There’s never been a case where a goldsmith doesn’t buy back the gold, especially if the gold carries markings showing it is from their own shop,” Jitti said. It would destroy customers’ trust in that goldsmith.
Prime Minister Prayuth Chan-ocha, heeding industry appeals, urged restraint on the part of sellers.
“I’m asking people to sell gradually, not in large amounts, as shops may face a cash crunch,” he said Wednesday.
The price of gold has been rising since the coronavirus crisis began. That’s typical of times of uncertainty as people shift their wealth into what they believe is a hedge against uncertain financial markets. Gold was trading Thursday at $1,755.60 an ounce on the New York Mercantile Exchange, the highest level since late 2012.
Many Asians hold gold as savings and investments. In Bangkok, gold shops are clustered in Chinatown, where long lines were stretched even further by social distancing. Jitti said he believes the current wave of sellers mostly are seeking to profit from the high price.
However, some of those waiting said they were selling their gold to get cash to support their families since many have lost their jobs.
Saranya Prasert, a fruit exporter, said the COVID-19 crisis has halted her business and her family is struggling for money. They are selling gold jewelry that they had kept for more than 10 years as savings.
“The reason we are selling our gold today is because we need to increase our cash flow. We still have to pay our employees so need the money now for the expense. The situation has impacted us. We can’t export our goods.”
Many in line had similar stories. Not all of them were selling because the price is high.
Pleonjit Sukcharoen, an office worker, said that while she is lucky that she still has a job, her sister is a street vendor who is unable to work because of a market shutdown order and now needs help with her hospital bill.
To help her sibling, she decided to sell her stash of gold that she had received as bonuses over the years from her employer.