(Kitco News) – Wars, elections, and interest rate uncertainty have driven Thailand’s state pension fund out of capital markets and into gold, local media reported Wednesday.
The Thai government pension fund (GPF) is in the process of reducing investments in assets that may be affected by war and increasing investments in gold and oil to mitigate risk, GPF Secretary-General Songpol Chevapanyaroj told the Bangkok Post.
“This year, we will adjust investment proportions by reducing assets that could be affected by war and increasing investments in alternative assets such as gold and oil, which help to mitigate risk,” he said. Gold and oil currently account for about 5% of the GPF's portfolio.
Songpol said fund management is more challenging in 2024 than last year because of the risk of wars and elections in several countries, along with the ongoing uncertainty regarding the direction of interest rates. He added that as the GPF increases its exposure to gold and oil, it will also reduce its investment in capital markets because of market uncertainties.
“Though we are reducing risks in the capital market, this does not mean we are avoiding investment in the capital market,” he said.
Songpol said that the lack of clarity about the direction of interest rates in the U.S. creates investment uncertainty, which makes it difficult to pick markets for investment, adding that the Federal Reserve's delay in cutting interest rates implies they believe the U.S. economy is relatively healthy and the U.S. stock market is stabilizing or improving.
Songpol said the impact of Middle East conflict on the U.S. economy will likely be minimal so investing in the U.S. market is still prudent, and underlined that the GPF is investing in the United States.
The GPF has $35 billion in assets under management and posted an investment return of 1.46% in 2023. Songpol said that for the first four months of this year, the unofficial investment return was around 2%.
Thailand’s gold market has been under considerable strain this year as record-high prices and surging demand have resulted in a sharp rise in counterfeiting and other corrupt practices.
On March 21, local gold prices set three consecutive all-time highs in a single day. “This has never happened before in history, especially as it is only 3 months into the year and the price has already risen by more than 10 percent,” Jitti Tangsitpakdee, President of the Gold Traders Association, told local media.
Tangsitpakdee said the sustained uptrend was being driven not only by the prospect of central bank rate cuts, but also by continuous local buying of physical bullion.
According to the Thai Ministry of Commerce, this period of skyrocketing gold prices has also contributed to an unprecedented surge in counterfeit gold, including both gold bars and jewelry, with over 1,600 cases reported in 2023.
Deputy Minister of Commerce Naphinthorn Srisanphan said that the Ministry “has commissioned the Gem and Jewelry Institute of Thailand (GIT) to test the purity of precious metals and the purity of gold using ultrasonic waves that do not damage the workpiece.”
The Ministry also warned the public against buying gold through online channels, where there is a greater risk of gold counterfeiting, and they reminded gold sellers that they must strictly abide by the law, including clearly displaying the price tag for gold and bullion products.
