Thailand first to buy gold out in the open.
Thailand hunts for gold to boost eroded reserves
01:38 a.m. Jan 08, 1998 Eastern
By Anchalee Koetsawang
BANGKOK, Jan 8 (Reuters) - Thailand is hunting for gold to boost sagging reserves hit by the baht's free fall, officials and trade sources said on Thursday.
The Thai government is launching a campaign to urge gold shops and the public to swap their stores of the precious metal for bonds.
Thousands of gold shops throughout the country have agreed to contribute one kilogram (32.2 troy ounces) of gold each to the government, a finance ministry official said.
''The government intends to issue bonds of either three-year or five-year maturity which are likely to carry an annual interest rate of five percent in exchange for the gold,'' the official told Reuters.
In return, the shops and members of the public willing to contribute to the scheme will be issued government bonds.
The collected gold will be used to shore up the country's fast-crumbling reserves, depleted by the baht's plunge of more than 50 percent since it was floated last July.
One kilogram of gold is worth around 450,000 baht (around $8,500) at current prices in Thailand, and roughly $9,100 at current world prices.
On Thursday, the Thai baht hit a new record low of 53.40 per dollar, buffeted by the region's currency crisis.
Kitti Tangsithpakdi, president of the Gold Traders Association of Thailand, said gold shops will also act as centres for the collection of contributed gold.
''We estimate that there is around 3,000-4,000 tonnes of gold holdings in the country. I think we can raise as much as 100 tonnes if the government needs it,'' he told Reuters.
With the price of gold in Thailand at 6,800 baht per 15 grams, these holdings would be worth about $26-$35 billion at current exchange rates, he noted.
Details of the campaign will be finalised next week after a meeting between the government and the gold trade.
The Government Savings Bank is likely to be selected as the issuer of the bonds, traders said, but it was not immediately clear what the government would do with the gold.
One option would be to refine it and export it to obtain much-needed foreign currency, according to trade sources.
Thailand is weathering its worst economic crisis in decades, afflicted by a severe liquidity crunch and troubles in its finance sector.
''This is a time to help the country. The world gold price is so low now. Instead of selling it, one should swap it for government bonds to help the country,'' Kitti said.
Gold closed at $283.60 per ounce on Wednesday in New York. It hit an 18-year low of $280.50 during trading on Monday.
Kitti said the value of the gold to be swapped for bonds, whether bullion or ornamental gold, would be based on the pricing for 99.99 percent pure gold.
The International Monetary Fund, which sponsored a $17.2 billion bail-out package for crisis-hit Thailand, suggested that the country maintain minimum foreign reserves of $24.5 billion this year.
Thailand's foreign reserves stood at $26.9 billion as of December 15.
When the rescue package was mapped out, it was based on a projection that the baht would stabilise at around 32.00 to the dollar.
With the baht plunging below the 53-level, analysts said Thailand's foreign reserves would come under severe pressure. |
