Thai Central Bank's Strategic Shift in Gold Trading: How Dollar-Denominated Gold Could Reshape Regional Investment Flows and Currency Dynamics

(A line graph illustrating the Thai baht's appreciation against the U.S. dollar from 2023 to 2025, with annotations highlighting key policy announcements and gold export surges.)

The Bank of Thailand (BOT) is navigating a pivotal moment in its monetary strategy, as it seeks to balance the competing demands of currency stability, export competitiveness, and the preservation of Thailand's status as a regional gold trading hub. At the heart of this recalibration lies a proposed shift toward dollar-denominated gold transactions, a move that could reshape investment flows and currency dynamics across Southeast Asia.

The Baht's Appreciation Dilemma

The Thai baht has surged to a four-year high against the U.S. dollar in 2025, driven by a 70% year-on-year increase in gold exports and robust global demand for bullion, according to Reuters. This appreciation, while a sign of economic confidence, poses risks to Thailand's export and tourism sectors, which account for roughly 70% of GDP, according to Market Research Thailand. A stronger baht reduces the competitiveness of Thai goods in global markets and threatens to erode the country's trade surplus.

To address this, the BOT has floated a 1–2% tax on baht-denominated gold transactions, aiming to curb capital inflows and stabilize the currency, reports Yuan Trends. However, this proposal has faced fierce opposition from the Gold Traders Association, which warns that the tax could drive investors to offshore markets or shift trading into U.S. dollar-based channels, undermining Thailand's role as a regional gold hub, according to The Nation.

Dollar-Denominated Gold: A Market-Driven Solution

Instead of imposing a tax, the central bank is exploring a market-driven alternative: promoting gold transactions in U.S. dollars. This approach would reduce direct pressure on the baht by decoupling gold trading from local currency inflows. A report on i3investor says the BOT has already begun discussions with industry stakeholders to encourage dollar-based settlements, aligning with global practices and enhancing Thailand's competitiveness in the gold market.

The potential benefits of this shift are significant. By denominating gold trades in dollars, Thailand could mitigate the correlation between gold prices and the baht's exchange rate. Data from Invezz indicates that the 30-day correlation coefficient between gold flows and the baht reached 0.88 in 2025, the highest in nearly three years. A dollar-based system would also align with ASEAN's broader de-dollarization efforts, as regional economies seek to reduce reliance on the U.S. dollar while maintaining access to stable assets, according to AMRO.

Regional Implications and Cross-Border Dynamics

Thailand's pivot to dollar-denominated gold trading could have cascading effects on neighboring economies. For instance, Cambodia has emerged as a key destination for Thai gold exports, with shipments reaching $2.35 billion in the first eight months of 2025-a surge attributed to waning confidence in the Cambodian riel, reports The Nation. By stabilizing the baht through dollar-based gold transactions, Thailand may indirectly support regional currency stability, as cross-border gold flows become less volatile.

Vietnam, meanwhile, faces its own currency challenges. The Vietnamese dong has depreciated by 10% against the dollar in 2025, prompting a gold-buying frenzy among investors seeking to hedge against inflation, according to Gold-Eagle. Thailand's shift to dollar-denominated gold could exacerbate this trend by increasing regional demand for U.S. dollars, further pressuring the dong. However, Vietnam has responded by liberalizing its gold market, including the establishment of a state-run gold exchange to narrow price gaps between domestic and global markets, according to Bloomberg.

ASEAN's Regulatory Landscape

At the regional level, ASEAN is grappling with the dual challenges of currency volatility and the dominance of the U.S. dollar. A report by the ASEAN+3 Macroeconomic Research Office (AMRO) highlights the risks of dollar dependency-noting that over 80% of trade invoices in the region are denominated in dollars-reported by Thailand Business News. Thailand's strategic shift could contribute to ASEAN's de-dollarization agenda by promoting local currency settlements and regional financial cooperation.

However, the success of this approach hinges on harmonizing policies across member states. While Thailand's gold sector is a leader in innovation-exemplified by digital platforms like the Pao Tang app-other ASEAN nations may lag in adopting similar reforms, The Thaiger reports. This disparity could create imbalances in regional investment flows, requiring coordinated regulatory efforts to ensure equitable growth.

(A bar chart comparing Thailand's gold exports to Cambodia, Vietnam, and other ASEAN countries in 2024 and 2025, with annotations on policy changes and currency trends.)

Conclusion: Balancing Competing Priorities

The Thai Central Bank's strategic shift toward dollar-denominated gold trading represents a delicate balancing act. While it offers a viable solution to stabilize the baht and preserve Thailand's position as a gold trading hub, it also raises questions about regional spillovers and the long-term sustainability of de-dollarization efforts. As the BOT finalizes its approach, the outcomes will likely set a precedent for how ASEAN nations navigate the intersection of currency policy, investment flows, and global economic uncertainties.

For investors, the evolving dynamics underscore the importance of monitoring Thailand's policy decisions and their regional ripple effects. A successful transition to dollar-based gold trading could not only stabilize the baht but also reinforce Southeast Asia's role as a resilient and interconnected financial ecosystem.