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A sharp rise in Thailand’s gold demand has alerted officials on the effects it may cause to the nation and its currency. Thailand is a huge consumer of gold, just behind China and India, but officials fear that the country’s consumption may be on the wrong track. Thailand now ranks the 3rd largest gold consumer in Asia, but industry experts are worried that the precious yellow metal is being used for covert currency bets and unregulated transactions

“People are struggling to understand why we have to import so much gold,” said Pipat Luengnaruemitchai, Pharat Securities’ assistant managing director. “These trading activities are part of the financial system. If anything happens, it could become a risk to the system.”

The increase in gold prices due to the political unrest in Iraq and the Ukraine adds to the worries of Thai officials. Gold is dollar-denominated, so it may pose severe losses for Thai consumers who are exposed to the precious yellow metal in the long run. Currently, BullionVault’s live price chart shows that gold’s price is fluctuating around $1,300 per ounce.

In 2013, India’s government imposed strict rules on its gold imports, so it’s only natural for gold peddlers to look at different channels. Last year, gold demand in Thailand rose to 125% compared to last year. That’s 36 tons more in Thailand’s reserves, which is more than how much Russian President Putin buys in a year. The WGC says that the increase is partly due to Thailand being used as a path to supply gold to other markets, particularly in India.

Vietnam has a record of getting involved with other nations’ interests that result into unfavorable events. For example, farmers in Cambodia, Laos, and Myanmar are selling their products to the border of Thailand instead of trading them in their own country because they know they’ll gain more profits from doing so. Gold smugglers in Thailand, unfortunately, are doing the same deed in India because they know they’ll get more from selling illegal gold in a country with strict importation laws.

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