Thursday, September 9, 2010

Traders shy as stronger Kyat sends local gold toppling

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Thursday, 09 September 2010 23:11 Myo Thein

Rangoon (Mizzima) – The gold price in the Burmese market has dropped dramatically on a weakening US dollar, with merchants of the precious metal reporting dormant trading in the local market.

From early this month, Burma’s Kyat has strengthened against the US dollar, the Euro and FEC (Foreign Exchange Certificates), and as a result the local gold price, linked to the Kyat-dollar exchange rate, was following the foreign currencies down, Burmese gold merchants said.

“The gold price as of last night was 632,000 Kyat per tical [1 troy ounce = 1.875 ticals], but in early intraday trading, it fell again to 629,000 Kyat. An hour later, it fell again to 626,000 Kyat per tical so we did not want to make transaction”, a merchant from Rangoon’s gold trading district around Shwebontha Street said.

In the middle of last month, the gold price reached the record high of 667,000 Kyat per tical, and leading merchants predicted it would hold above 640,000 Kyat per tical.

“The gold price has risen in the global market. But the gold price has dropped in Burma because of the exchange rate … The current gold price in the global market is more than US$1,250 per ounce. The current exchange rate is 910 Kyat per dollar. The gold price in Burma’s market is about 20,000 Kyat [about US$22 at the current rate] higher than the global gold price”, a gold merchant said.

The Burmese merchant’s formula to compare Burma’s gold price and the global price is [gold price in Burma (Kyat) per a tical = global gold price (in US$) per an ounce multiplied by the current Kyat-dollar exchange rate divided by 1.875]. Normally, the difference between the calculated gold price using the formula above and the actual gold price in Burma is about 10,000 Kyat.

If the difference was greater, some merchants from border areas traded gold. But, amid the current wide fluctuation of Burma’s currency, gold merchants from border areas were also staying out of the market, a merchant from Tachileik in eastern Burma’s Shan State said.

“The merchants daren’t make transactions so they’re idle at present, which means they’re losing about one million Kyat a day in income,” another gold trader from Tachileik told Mizzima.

The exchange rate of between Kyat and FEC is 760 Kyat per FEC (buying), and 730 Kyat per FEC (selling).

This month, FEC selling and buying rates were lower than 900 Kyat per FEC unit and the selling rate for the dollars, which was stable at around 990 Kyat per unit, decreased from Monday.

“We don’t know what will happen. There are many rumours. Some said the exchange rate may drop as low as 500 Kyat per dollar”, a speculator from the foreign currency exchange market said.

Inordinate delay in procuring import licences and import restrictions had caused the Kyat to strengthen against foreign currencies, some importers and exporters lamented.

Just before publishing at 10:52 p.m. (Rangoon, GMT + 6.30), the London Gold Exchange’s gold price was US$1,244.39 per ounce.

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