Thailand Cracks Down on Gold Trading

The Bank of Thailand has implemented restrictions on gold trading in an effort to reduce its impact on the Thai baht exchange rate. The measures, which were put in place in March this year, include a daily limit of 50 million baht for personal online gold trading and encouraging large investors to settle in US dollars rather than baht.

The restrictions have had some success, with the 60-day rolling correlation coefficient between the baht exchange rate and international gold prices dropping from a peak of 0.85 last year to 0.3 in April this year. However, as gold prices have recently risen, the correlation coefficient has rebounded to 0.65.

The Bank of Thailand is trying to build a firewall between gold prices and the baht exchange rate, which it believes will reduce volatility in the foreign exchange market.