What my trip to Thailand taught me about gold demand

If there’s one thing that’s going to transform the gold price, it’s Asian buying.

It’s about sheer weight of numbers. There are just so many people in Asia, and they love gold. It’s in their culture. And as they get richer, they’re going to spend a large proportion of their new-found wealth on it.

Current mine supply can’t meet that demand. So it’s just a matter of time before the price has to go higher.

That’s the argument – or something like that, at least.

I’ve just come back from a two-week trip to Southeast Asia. Did my experience confirm or deny this?

The big meh – Westerners couldn’t be less interested in gold

Just before Christmas, there was a market at my children’s school. Lots of parents and friends of parents set up their own little stall selling anything from scented candles to second-hand toys. The profits would go to charity.

One of the mums had a stall where she sold little bits of jewellery she had made.

The gold price was close to a low at the time. I’d grown a little tired of my enormous hoard buried on a remote island off the coast of Scotland and decided I wanted to enjoy some of it on a day-to-day basis. And I’d read somewhere that to have gold about your person is healthy – it’s the electrolytes or something.

What’s more, it would be nice to have a constant reminder of what honest money looks and feels like.

So I proposed a deal to the jeweller, Kath. I’d give her two gold coins. For a fee, she’d melt them down and make me my own little bit of bespoke jewellery. She was delighted at the idea.

At first she came back with a kind of golden bead, but the gold was very red – a little too red for my liking. We’d had the gold hallmarked – so there was no foul play. I spoke to a refiner and discovered that the alloy mixed with the coin to harden it (this was a 22ct coin) produced the ruddy tone. If I wanted a more golden colour we should just add – ironically – some silver.

So we did this and Kath came back with another design. It looks a little like a coiled snake or a kind of walnut whip, if you remember those chocolates – and it had a much more attractive golden colour. You could even call it my golden poo.

Anyway, the point is, it’s beautiful and unique. I’m delighted with it. Here is the offending piece:

Dominic Frisby' spiece of bespoke gold jewellery

Anyway – so I showed it rather proudly it to friends and work colleagues. Nobody was interested.

I wouldn’t let it go. “Look at this, what do you think?” Nobody gave a monkey’s. They didn’t say it was beautiful or ugly. They had no opinion. They just could not care less.

And there in a nutshell is the Western attitude to gold.

Southeast Asians know real gold when they see it

My experience in Southeast Asia was rather different.

A month ago I set off on a trip to an island in Thailand to switch off for a bit. I flew from London via Kuala Lumpur to the Malaysian island of Langkawi, and from there I got a boat to my remote Thai hideaway.

As soon as I got to Langkawi, my little necklace started generating interest. The bloke selling me tickets for the boat asked me about it. He clocked it was gold straight away – but he wanted to know what it was. A snake maybe?

He called over his colleagues to take a look. The chap in the coffee shop where I was waiting also started asking.

Once on my Thai island – where it was more visible as I had my shirt off most off the time (apologies to the locals) – people were also asking about it. The local Thais were sea gypsies (‘Chao Le’). Many of them clocked it.

Some of the Thais who’d come over from the mainland for work clocked it. Thai, Malaysian and Chinese tourists clocked it. And the Burmese chap with whom I played a lot of Frisbee (it’s my name, after all, and I’m a bit of a hippy at the end of the day) clocked it.

The only Westerner who showed any interest was the Italian anthropologist (the world’s leading expert on the Chao Le) in whose guest house I staying – with the correct observation that Asians would appreciate its value far more than Westerners.

In fact, so many people admired it, asked me what it was, and if they could touch it, it’s a wonder I didn’t have it nicked.

The message in all of this

The obvious straw to clutch here is that ‘on the street’ (or on the beach) there is still plenty of Asian interest in physical gold.

And taking a step back, Indians remain the world’s biggest buyers of the physical metal. The Chinese government has encouraged its citizens to buy gold – and many have. And I have written before about my previous experiences in Malaysia about attitudes to gold.

There are even rumours (mostly unfounded, I suspect) that the Chinese government is planning some kind of partial return to a gold standard.

But will that change?

People in the East want (and in many cases already have) the luxuries that we in the West take for granted – fridges, cars, computers, and all the rest of it. As they become more ‘Westernised’, might they lose interest in gold?

Because over here, once upon a time, gold was money. Gold sovereigns were the old pound coins. Gold played an almost daily role in our lives. The gold standard was the monetary rock on which the Great British trading empire was build. The value of gold was known and appreciated.

But over the past 100 years, attitudes have changed. Now gold couldn’t be more irrelevant.

Perhaps as the East develops, gold will become as irrelevant to them as it has to us in the West. We’re already seeing signs of that. Jewellers report that young people in India prefer 18ct gold to the purer 24ct stuff their parents would choose. Perhaps as they get wealthier and more secure, they lose sight of gold’s utility as a portable store of value.

I get both sides of this argument. The Asian appreciation of gold is clear, but it’s also conceivable that gold will fall in significance there just as it has here. It’s an argument that we won’t know the answer to for another generation or so.

(And if you want to convert your coins to jewellery, here’s my jeweller’s Facebook page.)

Dominic Frisby is the author of Life After The State and Bitcoin: the Future of Money.

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