Bloomberg News

Thai Gold Buyer Doubles Imports After Bear Slump: Southeast Asia

September 25, 2013

YLG Bullion Headquarters

An employee stands behind a cart loaded with trays of gold bars at the YLG Bullion International Co. headquarters in Bangkok. Photographer: Dario Pignatelli/Bloomberg

YLG Bullion International Co., Thailand’s biggest domestic gold importer, expects to more than double purchases this year after the bear market in prices spurred a surge in demand for physical metal.

The company may import as much as 200 metric tons in 2013, from 92 tons last year, Chief Executive Officer Pawan Nawawattanasub said in an interview yesterday. First-half shipments advanced to 112 tons, accounting for 60 percent of the country’s total, she said. A ton is valued at $42.6 million.

Gold tumbled 21 percent this year, heading for the first annual retreat since 2000, as some investors lost faith in the metal as a store of wealth. With prices now 32 percent below the record reached in September 2011, the rout is boosting demand for bullion bars and coins, global sales of which surged 78 percent to an all-time high in the second quarter, according to the London-based World Gold Council.

“Cheaper prices are attracting customers to buy bullion bars as they see it as money better spent than on something like a Hermes bag,” said Pawan, whose Bangkok-based company supplies retailers and investors in Southeast Asia’s second-biggest economy. “Demand in Thailand can continue to grow, partly because collecting gold is in our culture.”

Gold advanced as much as sevenfold since 2000, reaching a peak of $1,921.15 an ounce in a 12-year winning streak that was the longest in at least nine decades. The metal traded at $1,324.65 today in London, having entered a bear market in April. Goldman Sachs Group Inc., Societe Generale SA and Credit Suisse Group AG are among those anticipating further declines.

Asian Consumer

Demand in Thailand rose 58 percent to 26.6 tons in the second quarter from a year earlier, World Gold Council data show. The nation was the third-largest Asian user after India and China in 2012 and ranked seventh globally. Individual investors account for about half of gold purchases, said Pawan, who has worked in the gold and jewelry business for two decades.

“There has been a complete change of customer profile,” said the 54-year-old mother of two, speaking in Thai from her office in Bangkok’s Sathorn business district, which she shares with her husband, daughter and son. “Huge volumes from retail investors are helping to offset a retreat from big investors.”

The company’s sales rose to 836 billion baht ($26.6 billion) last year, from 2.6 billion baht in 2004, the first full year of operations for the bullion-trading firm. The group’s other businesses include a futures brokerage run by Pawan’s daughter, and a Singapore trading unit overseen by her son. Her husband is president of YLG Bullion.

“Despite an increase in gold imports, our revenue this year will fall in line with a decline in trading volumes after the slump in gold prices,” Pawan said, declining to give a specific forecast.

Bullion Trading

YLG Bullion started its first overseas office in Singapore this year, as the company seeks to expand its bullion trading to other Southeast Asian nations including Cambodia, Vietnam, Laos and Indonesia, Pawan said.

Thai traders face the possibility of greater scrutiny by the central bank, which earlier this week raised concern about discrepancies between spot market trades and the dollar value of transactions. More discussion is needed before deciding whether measures will be introduced, Governor Prasarn Trairatvorakul said Sept. 23, without giving details.

“Many of us in the trade are trying to meet with the Bank of Thailand to seek clarification,” Pawan said. “We have been monitored by the bank in terms of currency transactions and flows” for about a year, she said, adding that most importers close hedging positions after each transaction to manage risks posed by currency and price fluctuations.

Jewelry, Coins

YLG Bullion plans to sell shares in Thailand and list on the local exchange within three years. Her family may reduce its stake to 75 percent, from almost 100 percent, Pawan said. Non-family managers will join YLG Bullion to ensure continuity even if future generations choose not to join the company, she said.

Strengthening demand in Thailand mirrors trends in Asia. Sales of jewelry, coins and bars will advance to as much as 1,000 tons in India and China this year, the World Gold Council says. That would exceed China’s record of 778.6 tons set in 2011 and approach India’s all-time high of 1,006.5 tons in 2010.

Australia & New Zealand Banking Group Ltd. (ANZ), UBS AG and Deutsche Bank AG opened bullion vaults in Singapore this year as investors accumulated more metal. U.K. bullion exports rose eightfold in the first half, a sign of the flow of metal from west to east, according to Macquarie Group Ltd.

Perth Mint

YLG Bullion sells gold bars sourced from firms including the Perth Mint in Australia and London-based Johnson Matthey Plc (JMAT), Pawan said. Thailand may import 330 tons and export 100 tons this year, she said. That compares with purchases of 329 tons and sales of 330 tons in 2012, government data show.

The Brink’s (BCO:US) Co., based in Richmond, Virginia, and London-based G4S Plc (GFS) were Thailand’s biggest gold importers by value in the first seven months, commerce ministry data show. Brinks’s imports precious metals for customers including trading companies, banks and gold shops, according to the company.

Thailand’s $365.6 billion economy expanded in 13 of the past 14 years, boosting incomes and demand for gold. The number of high net worth individuals in the country, or people with $1 million or more to invest, grew at more than 12 percent annually from 2009 through 2011 to 65,000, according to data from Cap Gemini SA (CAP) and the Royal Bank of Canada.

“The gold market is rapidly spreading beyond Bangkok to the provinces,” said Sallyann Whittingham, the global services manager for Thailand and Laos at Brink’s, which has operated in the Thai capital since 1986. “Thailand is also ideally geographically situated to feed into the Southeast Asian countries.”

To contact the reporters on this story: Supunnabul Suwannakij in Bangkok at ssuwannakij@bloomberg.net; Chanyaporn Chanjaroen in Singapore at cchanjaroen@bloomberg.net

To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net


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Companies Mentioned

  • BCO
    (Brink's Co/The)
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