Recent moves by the Bank of Thailand to increase its gold reserves may signify a strategic shift towards bolstering a de-dollarized trading framework, asserts Jan Nieuwenhuijs, an analyst specializing in the gold market. According to Nieuwenhuijs, these ongoing gold acquisitions by the central bank likely aim to mitigate potential trade imbalances expected from the deployment of Mbridge, a cross-border settlement initiative using central bank digital currencies (CBDCs).
Nieuwenhuijs points out that Thailand’s consistent accumulation of gold echoes similar strategies observed in China since November last year, marking a departure from the conventional “buy low, sell high” approach typically seen among other nations. Notably, Thailand’s purchases spanned different price points, with significant acquisitions occurring from October 2023 at approximately $2,000 per ounce to April 2024, when prices peaked at $2,300 per ounce.
The accumulation of gold by Thailand not only reflects geopolitical concerns but also influences domestic sentiment, as Thai citizens respond to their central bank’s proactive stance. “In addition to a longstanding tradition of gold savings, the Thai public is encouraged by their central bank’s accumulation of this precious metal,” highlighted Nieuwenhuijs.
Nieuwenhuijs’ observations follow closely on the heels of a bilateral Cooperation Framework for Local Currency Transactions between China and Thailand, coinciding with the imminent launch of Mbridge’s minimum viable product (MVP). Both nations are pivotal participants in the initial phases of the Mbridge platform.
However, Nieuwenhuijs emphasizes that for a de-dollarized system like Mbridge to succeed, it must integrate with a stable asset capable of rectifying imbalances, effectively channeling excess reserves into gold. “The combination of Mbridge and gold recycling facilitates non-dollar transactions and the storage of surpluses in non-dollar denominated assets, thereby achieving de-dollarization,” concluded Nieuwenhuijs.
This strategic approach by the Bank of Thailand underscores its proactive stance in adapting to the evolving landscape of international trade and finance, leveraging gold reserves to potentially safeguard against currency fluctuations and reinforce financial sovereignty amidst global economic shifts.
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