Present changes in the global gold market, in which pricing power is shifting East, could be a precursor to a transformation in the international monetary order. Possibly, trade in the East will settle through a system connecting local CBDCs, while any remaining imbalances are transferred in gold.

Introduction

Up until 2021, many countries in Asia were gold price sensitive for nearly a century: they bought when the gold price was steady or declining but swiftly turned into sellers when the price increased. During this period the price of gold was set in the West and the East dampened volatility, best demonstrated in my article "The West–East Ebb and Flood of Gold Revisited."

After the war in Ukraine broke out in 2022 things started changing in the global gold market, which I have described in "The West Is Losing Control Over the Gold Price" (August 2023), and "China Has Taken Over Gold Price Control from the West" (March 2024). As the titles of the articles suggest, the war, and the resulting sanctions on Russia, set in motion large scale gold purchases by the Chinese, who flipped from being price sensitive to price drivers.

International trade statistics show Thailand has followed China since November 2023. Instead of steadily accumulating and selling into rallies, Thailand was a solid net importer while the gold price went up 20% from ?72,100 Thai baht per ounce in October 2023 to ?85,700 in April 2024 (from $2,000 to $2,300).

The consensus is that elevated demand in Thailand is due to geopolitical tensions. Next to a long history of saving in gold, the Thai people are stimulated to buy gold as their central bank is accumulating the precious metal too.

Since the Great Financial Crisis, the central bank of Thailand (BOT) increased its gold reserve nearly threefold from 84 tonnes to 236 tonnes. Late October 2023, BOT Deputy Governor of Monetary Stability, Alisara Mahasandana, said in an interview that gold is a relative safe haven in an era of high inflation and growing geopolitical risks. "We need to create a resilient portfolio against all shocks and changes around us… [Gold] is a hedging tool during high inflation and political uncertainty as well as geopolitical events. It's good for risk diversification," she said. Adding that bonds of countries previously perceived to be safe bets face an uncertain outlook.