BOT throws weight behind gold as risk diversification amid geopolitical risks
Gold remains a safe haven asset for the Bank of Thailand (BOT), the central bank’s deputy governor for monetary stability, Alisara Mahasantana, said in an interview to Bloomberg news.
She said the gold deposits helped protect Thailand's foreign reserves, which are currently valued at US$210 billion (about 7.5 trillion baht), from fluctuations in the market due to high inflation rates and increased geopolitical uncertainties.
The BOT deputy chief revealed that the central bank had increased its gold reserves over the past three years to mitigate investment risks.
Alisara did not disclose official figures of Thailand's gold purchases, but the central bank's data showed that Thailand's gold reserves had doubled since 2019.
Apart from the BOT, the central banks of many other countries, including China, Poland, and Turkey, have shown interest in gold. They have increased their gold reserves as the US dollar remains strong, and global interest rates are rising.
Gold has become one of the most prominent assets, especially since the Hamas group launched attacks on Israel on October 7, causing gold prices to surge by approximately 9% due to increased demand for safe-haven assets.
For the BOT, diversifying the reserve assets became crucial, especially after the country's foreign exchange reserves, primarily held in foreign currencies, government bonds of the United States, and dollars, dropped by about U$47 billion after reaching a record high of U$258 billion in December 2020.
Additionally, the weakening of the Thai baht by 20% during the same period and the BOT's efforts to mitigate the depreciation have also led to a decrease in the central bank's foreign exchange reserves.
According to the BOT's website, as of October 20 of this year, the central bank's gold reserves stood at U$15.60 billion, worth approximately 565 billion baht, an increase of over U$7.5 billion, or nearly 270 billion baht as of year-end 2019.
"Asset diversification has become more challenging. We need to create investment proportions that are resistant to market shocks and the changes around us. Therefore, risk diversification is crucial," Alisara told Bloomberg.
