Trading gold leads to domestic currency out of control? Bank of Thailand: Big traders, please use USD for transactions

Multiple platforms have warned that Thailand's crackdown on online gold trading may dim a rare bright spot for investors, as the Bank of Thailand is also mulling further restrictions.

With global gold prices rising into 2025, the Thai baht has also surged to a five-year high, causing headaches for this export- and tourism-dependent economy. The Bank of Thailand blames online gold speculators, whose rapid trades worth millions of dollars at a time have amplified baht volatility—on some days the swings have hit 30%.

To contain the out-of-control exchange rate, the Bank of Thailand began capping individual online trading at 50 million baht per person per day (about $1.6 million) from early March, aiming to force top investors toward dollar-based trading. The central bank has also reserved the possibility of further lowering the daily limit by 40% to 30 million baht.

"We built an ecosystem where ordinary investors can participate in gold trading—a system envied by the world. Instead of nurturing it, they are trying to dismantle it," said Pawan Nawawattanasub, CEO of YLG Bullion International, one of Thailand's largest gold traders.

Pawan insists that to see significant results, the entire digital gold trading system needs to shift to a dollar-based platform, transferring the burden of exchange rate conversion onto investors.

In Thailand, gold is embedded in daily life: it decorates Buddhist temples, glitters in the shop windows of the narrow alleys in Bangkok's Chinatown; farmers store it in safes behind their counters; families give it as gifts to newborns and newlyweds. Thailand's per capita gold purchases even exceed those of the world’s two most populous countries—China and India.

This preference for safe-haven assets has seamlessly transitioned online, with all 14 major gold trading companies offering at least one app. Digital markets provide an extraordinary, direct channel to trade global assets, with no time restrictions. Thais can buy and sell any amount of gold in their own currency, without the friction of foreign markets.

The link between gold trading and the baht is, to some extent, mechanical. Gold is priced in dollars and often rises when the dollar weakens. When Thai traders sell, dollar proceeds are converted back to baht, boosting demand for the local currency. Large investors can close out sizeable positions and convert dollars to baht, magnifying gains—especially in the lower-liquidity overnight markets.

Last year, the baht surged nearly 8%. The government said this was at odds with sluggish economic fundamentals, including mild GDP growth, weak consumption, and underperforming stock markets.

Bank of Thailand Deputy Governor Piti Disyatat said in a March interview that the central bank has spent years discussing a shift to dollar-based platforms with gold traders. He said, "The goal is to promote, to create incentives so trades are denominated in US dollars. We can't wait any longer."

The Indian government has also intervened to shield the rupee from the impact of surging gold prices. Since India relies on gold imports, the impact on its currency is the opposite of Thailand’s—the swelling gold import bill weakens the rupee. This week, authorities in India more than doubled the import tax on gold and silver from 6% to about 15%, aiming to preserve foreign exchange for petroleum imports.

Under pressure from business groups, policymakers in Bangkok have limited options to intervene in the baht. Aggressive FX intervention risks upsetting Thailand’s largest trading partner—the United States—while rate cuts carry significant risks.

Kausani Basak, an economist at ANZ Bank, said targeting major gold traders is a pragmatic move for the Bank of Thailand, as they have an outsized influence on exchange rate volatility. By focusing on a small group, policymakers can suppress large, volatile capital flows without disrupting the broader market, she noted.

Platform operators interviewed by Bloomberg News declined to reveal the identities of large-scale traders, but said there are hundreds of them. They are often older, less involved with cryptocurrencies, and less likely to trade in person due to their age.

These investors are described as business owners with massive cash flow, such as rubber plantation operators earning about 200 million baht annually, or apartment moguls managing tens of thousands of units with monthly incomes exceeding 100 million baht.

Kritcharat Hiranyasiri, president of MTS Gold Mae Thongsuk Group, said the central bank is trying to contain exchange rate volatility it cannot fully control, such as a weakening dollar and increased foreign exchange inflows, and has made gold traders the scapegoat.

"We have always insisted we are not the culprits. Perhaps on some days, these activities do heighten volatility, but we are not causing long-term appreciation," Kritcharat said.

A report by the London Bullion Market Association described Thailand as “one of the most vibrant retail trading environments in Asia.” Unlike most countries where gold is considered a long-term holding, Thai consumers frequently engage in short-term buying and selling, with half of all gold trades happening online.

Sittipong Sirimaskasem, an influencer, is another investor who has documented his journey from cryptocurrencies to gold to nearly 200,000 followers on TikTok. While his trades aren't the large ones targeted by the central bank, his trading pattern mirrors those of the big players.

He said, “It feels more rewarding to see profits in real time than with stocks. The money is always there—no exchange rate issues, no fees, nothing complicated. Even tiny fluctuations can earn you your coffee money.”

The Bank of Thailand said early signs indicate that some trading has shifted to dollar-based platforms, though officials caution it's still too early to conclude how effective their intervention will be.

An analysis by Bloomberg Intelligence found that after the Bank of Thailand intervened, the dollar-baht correlation with gold has weakened, though another gold rally could still support the baht. Despite its drop from 2025 highs, the outbreak of war in the Middle East and the resulting energy crisis have remained the primary drivers of the currency.

For trading platforms, the bigger concern is whether the central bank will widen its crackdown to include lower-value transactions. While gold traders are rushing to build dollar-based platforms for affected clients, this could take months.

"We all have good intentions; nobody wants to harm the economy for personal gain," said Teerarat Jutavarakul, managing director of InterGold Gold Trade Co. Ltd., which also operates its own online platform. "We pray every day for the baht to depreciate."