Singapore has been trying to persuade Thailand's top five gold traders to establish footholds in the city-state as it aims to become a centre for gold-price referencing in Southeast Asia before the ASEAN Economic Community (AEC) takes shape in 2015.
Nuttapong Hirunyasiri, managing director of MTS Gold Futures, said the Singaporean government had dispatched a team to Thailand to offer relaxed regulations and tax incentives to traders who open offices in that country. It wants to become a reference centre for gold prices.
"Thailand's gold market has become bigger and better known in the past few years. It's ranked third in Asia. [Thai] gold traders also want to upgrade themselves to international standards," Nuttapong said.
MTS Gold will wait and see if the Bank of Thailand imposes stringent controls on the gold trade, possibly exchange-rate lock-ups and a price-settlement system. If that happens and makes trading less flexible, the company will consider the Singapore option, he said.
Nuttapong said Singapore's gold market was more attractive than Thailand's, as it was more flexible on legal issues and transactions.
An anonymous source at YLG Bullion International also hopes the BOT refrains from making rules to strict.
The source said YLG became interested in opening an office in Singapore after its government tried to convince it for the second time. Having an overseas office would facilitate dealing within the AEC.
A source from Hua Seng Heng who asked not to be named said that having an office in Singapore would make transactions more convenient and there would be a need for overseas growth after the AEC takes effect in 2015.
"Several gold traders plan to have offices in Singapore as trading bases instead of in Thailand," he said.
In response to the Thai central bank's concern that some were using the gold trade to speculate on currency, Nuttapong said he did not believe big operators had any such intention but were only trying to cut foreign-exchange risks amid market volatility.
The Hua Seng Heng source said there were a lot of gold imports in the first and second quarters of 2013 because demand was fuelled by the metal's reduced price. However, he doubted investors would indulge in currency speculation through gold because of the cost and complicated procedures involved.
"Gold traders are currently uncomfortable with the lack of clarity over the BOT's intentions. Each transaction already goes through complex conditions and procedures," he said.
Gold Traders Association chairman Jitti Tangsithpakdi said the BOT early this month had asked for information on the significant level of gold imports. The association cited low gold prices in the first half of this year as the reason for the high influx of the precious metal.
"Gold imports and exports differed by about 5-10 per cent, and such a low level should not point to too much speculation," he said.
However, he expressed concern over online gold transactions, which required a regulator.