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In times of national crisis, bank failures, war, and invasions and in case of negative real
interest rates or high inflation people consider gold as a solid asset and like to invest in such
precious metal, the international investors sought a safe haven in the precious metal like gold
in the global recession in the history (Opdyke 2010). We know that Thailand is the major
economical financial system in the ssociation of !outh"east sia #ations. When the
investor has an investment in the international stock market, he$she will usually care about
the international capital the motion situation, the international politics and the economical
situation change, in particular, in the Thailand stock market (SET) change. Therefore, the
relation between the Thailand%s stock markets with a factor of the gold market is worth
further discussion (Horng & Huang 2013). The purpose of the present paper is to e&amine
the relations of the Thailand%s stock markets with a factor of gold market.
Lieraure Re!ie"
The study of the capital market of a country in terms of a wide range of macro"economic and
financial variables has been the area under discussion of many researches during the last two
decades. 'mpirical studies make known that when financial deregulation comes to pass, the
stock markets of a country become more sensitive to both domestic and peripheral factors and
one of these factors is the price of gold (#$a%endu &'unia1 and So$na' (uk'ui) 2013).
!tock e&change as part of capital market in a country has remarkable role in guiding deposits
to different sections of economy (*one+) 200,). In the current global financial crisis and
credit crunch, stock e&changes around the world in developing and developed countries are
showing low level of trading activities (Hina S'a'-adi & (u'a$$ad Na!eed C'o'an)
2011.. (old is a leading economic indicator, and the changes in gold prices can e&plain
investor sentiment about world economy. n increase in gold prices typically signals that the
economy is struggling. )actors that contribute to an increase in the price of gold include a
weak dollar, an increase in inflation and low interest rates over the long term. Individuals
interested in investing in gold should understand the relationship between the price of gold
and important economic factors (Ro+e *o'n+on) edioria%/ """0e'o"01o$) 2013). When
the price of gold is high, Investors flock to gold when they are protecting their investments
from either a crisis or inflation. When gold prices drop, which usually means the economy is
healthy. That*s because investors have left gold for other, more lucrative, investments like
stocks, bonds or real estate (2i$3er%y #$adeo) 2013).
Investors can invest in gold in two ways either in physical form ((old coins and bars through
+ank or (old Traders) or in non physical form ((old 'T)s, (old fund of funds etc through
brokers or authori,ed entity such as !tock '&change).
5o%d e61'ange7raded produ1
(old e&change"traded products are e&change"traded funds ('T)s), closed"end funds (-')s) and
e&change"traded notes ('T#s) that aim to track the price of gold. (old e&change"traded products
are traded on the major stock e&changes around the world ("""0"ikipedia0org).
85o%d 9und8
mutual fund or e&change"traded fund ('T)), that invests primarily in gold"producing
companies or gold bullion. n e&change traded fund that tracks the value of gold and
responds to movements in the same manner as an otherwise similar double leveraged 'T).
double gold 'T) is one in which the spot value of gold or a basket of gold companies acts as
the underlying for the fund. The 'T) attempts to deliver price movements e.ual to double the
movements of the underlying gold value. The price of shares within a gold fund should
correlate very closely to the spot price of gold itself, assuming the fund holds the majority of
its assets in bullion or in the stocks and bonds of gold miners and manufacturers
Di44eren1e+ a$ong ET9) a $uua% 4und and a +o1k
Topi1 ET9 # +o1k # genera% open7ended
$uua% 4und
#n e61'ange raded produ1
(arke $aker
Trading 1'anne%+ securities broker
n asset management
(a fund issuer )
Trading 'our+ /uring e&change trading hours !pecified by a fund issuer
Trading pri1e 0eal"time market price 'nd"of"day price
Sour1e1 ("""0+e0or.
E61'ange Traded 9und+ :ET9+. and T'ai%and So1k (arke :SET.
'T) is typically designed to track a performance of an inde& or commodity price, such as
!'T23 Inde&, a stock sector inde&, commodity inde& and commodity price including gold
price and oil price. 'T) has globally become a popular financial product over the last decade.
/ue to the benefits of 'T) as an e&change"traded product and a diversified fund, the !tock
'&change of Thailand (!'T) encouraged a launch of the first e.uity 'T) in Thailand, named
Thai/'4 !'T23 'T) (T/'4) tracking !'T23 market"weighted inde&, which was first
traded on !eptember 5, 6337("""0+e0or).
ET9 Trading ;ro1e++
ET9 under%ying 5OLD
(a<or S'are'o%der+ Under%ying a++e Li+ed Dae
2T#( 5OLD ET9
8nit of !9/0 (old
!hares (6:;31<=)
: ugust 63>>
T'aiDE> 5o%d ET9
gold bars of ??.??@ >> Actober 63>>
275o%d ET9
N=# domestic gold bars of
67 Actober 63>>
&ua%uang CH#A 5o%d ET9
domestic gold bars of
> #ovember 63>>
T'ana1'ar 5o%d ET9
gold bars of ??.??@ >> pril 63>6
Sour1e1 ("""0+e0or.
In!e+$en in 5o%d
Hedge again+ 4inan1ia% +re++
(old, like all precious metals, may be used as a hedge against inflation, deflation or currency
devaluation (Boe )oster, !eptember 63>3). (old counters the effect of inflation and currency
fluctuations, and also has performed as an economically secure asset during the time period
of recession. In time of inflation, (old has been insurance for the portfolio and has prevented
value erosion. In short, 9ortfolio containing gold are generally regarding as more robust and
less volatile (CS$ar Bay o In!e+ in 5o%dD, published by #ational !tock '&change of
India, 63>E).
O44i1ia% Re+er!e 3y 'e 1enra% 3ank o4 T'ai%and :&ank o4 T'ai%and.
(old is held by governments as reserve instrument to function its economic operation
.ccording to the International Fonetary )und (IF)), +ank of Thailand maintains a gold
reserve of G2?52 million (appro&imately) ("""0i$40org / CTH#IL#ND Inernaiona%
Re+er!e+ and 9oreign Curren1y LiDuidiyE )ebruary E, 63>;).
Dire1 In!e+$en
Fany investors saw these tremendous increases in the price of gold and bought it as a direct
investment to take advantage of future price increase. Athers continue to buy gold because
they see it as a finite valuable substance, with many industrial uses (2i$3er%y #$adeo)
*e"e%ry and indu+ria% de$and
(old is one of the most desirable forms of valuable material to the investors. #o matter its
deficient functionalities and applications in almost any industries, gold%s aesthetically
pleasing nature and apparent splendor has made it e&cellent for ornamental purposes.
variety of adverse economic situations could be guarded against with a modest gold investing
(Inrodu1e o4 5o%d In!e+ing 7 , #pri% 2013) pu3%i+'ed 3y 5o%d In!e+ing 5uide). (old
jewelry recycling
In recent years the amount of second"hand jewelry being recycled has become a multi"billion
dollar industry.. The term H-ash for (oldH refers to a service for people to earn cash by
selling their old, broken, or mismatched gold jewelry to local and online gold buyers,
(On%ine Ca+'4or 5o%d Con+u$er ReporF2013/ """0opon%inego%d3uyer+01o$).
9unda$ena% ana%y+i+
Investors using fundamental analysis analy,e the macroeconomic situation, which includes
international economic indicators, such as (/9 growth rates, inflation, interest rates,
productivity and energy prices.
5o%d !er+u+ +o1k+
Dow/Gold Ratio 19682008
The performance of gold bullion is often compared to stocks due to their fundamental
differences. (old is regarded by some as a store of value (without growth) whereas stocks are
regarded as a return on value (i.e., growth from anticipated real price increase plus
dividends). !tocks and bonds perform best in a stable political climate with strong property
rights and little turmoil (en0"ikipedia0org). In his book +asic 'conomics (633;), Thomas
!owell argued that, in the long"term, gold*s high volatility when compared to stocks and
bonds, means that gold does not hold its value compared to stocks and bonds.
Te1'ni1a% ana%y+i+
s with stocks, gold investors may base their investment decision partly on, or solely on,
technical analysis. Typically, this involves analy,ing chart patterns, moving averages, market
trends and$or the economic cycle in order to speculate on the future price.
Curren1y E61'ange Rae :I$por & E6por 9un1ion T'eory.
n appreciation of Thai baht provides the cheaper cost for Thai gold importers so Thai gold
price will decrease. It also generates price competition among countries to supply gold to the
market. These are the top ten gold e&porting countries influencing and affecting the supply
and trade of gold globally.
Oi% ;ri1e :In4%aion T'eory.
change of gold price has direct affect to inflation. <igher inflation seems to generate more
demand of holding gold. Indirectly, gold is a fundamental input of many products and gold is
no e&ception for this. (enerally and easily, transportation cost is computed and included cost
of all goods.
SET Inde6 :;or4o%io T'eory.
change of set inde& has impact on assets holding decision. If !'T inde& is increasing, it is
more attractive and more investors are attracted to buy stock. (old, as a choice among other
assets, seems to be dumped to the market since the investors go to stock market.
Inere+ Rae+ :;or4o%io T'eory.
change of interest rates has similar result as !'T Inde&. If interest rate is increasing, it is
more attractive and more investors are attracted to deposit money at a bank. (old, as a choice
among other assets, is less interesting and be left in the market since investors go to banks.
5o%d Deri!ai!e+ :De$and & Supp%y T'eory.
change of gold derivative prices has impact on investors% e&pectation. If the derivative
price is increasing, investors will have more demand to buy gold at the moment to speculate
on price of the real gold asset price which is profited from the difference price of the
derivatives and gold.
C'ine+e Ne" Aear :De$and & Supp%y T'eory.
In Thailand, -hinese #ew Iear is considered culturally important day. -hinese"Thai 9eople
have belief that (old represents prosperity, giving gold as a gift alike giving the prosperity to
others. It is obviously seen that when -hinese #ew Iear comes, there is more demand of
gold and more volatile of Thai gold price.
Sour1e+1 The currencies e&change rates, oil price, !'T inde&, Interest 0ates and -hinese
#ew Iear is from 0euters /atabase,
+ank of Thailand (http1$$www.bot.or.th$+AT<<omepage$/ata+ank; )ebruary 6336 J >>
pril 633:, and 66 #ovember 6332 J62 pril 633:).
9inan1ia% ;aper
Thailand !tock e&change offers gold based financial paper which trades in !'T (annual
0eport of +ank of Thailand, 63>6). s gold price rises, this paper are become a lucrative
option to invest for the investor. It gives the signal that current share market position may be
volatile to invest. Investor feel more secured to invest this sort of investment by lowering the
chance of facing loss in the investment.
The +ank of Thailand regulates gold trading, as it suspects gold imports have been used to
speculate on e&change rates. The central bank also wants to protect retail investors who buy
gold"linked financial papers. The governor is also concerned about the transactions of gold"
linked papers, especially forward contracts transacted outside Thailand )utures '&change
(!arun=ijvasin, !uphannee9ootpisut, Wichit -haitron, 63>E).
0ecent political unrest across the country, economy of Thailand slows the pace of growth.
8ncertainty and instability make believe the investor that current stock market may be
volatile to invest. +ut on other hand, through smuggling by some undefined group of people,
it is difficult to hold up the gold price in a stable manner. (old price in Thailand is not
fluctuating by that means in current time. It means investors are not !uring about the
potentiality about the investment on gold instead of stock or other mean.