A man holds bars of gold in Yangon. (Frontier)

All that glitters: Gold market freezes amid junta crackdown

The regime has used blunt measures to try to control soaring gold prices, adding another layer to the precarious house of cards it’s built around Myanmar’s crumbling economy.


Shwe Bon Thar Road in downtown Yangon is famous for its boisterous gold and gems market. In days gone by, you’d be mobbed by brokers the moment you stepped out of your taxi.

“If we find customers for the gold traders, they give us a small portion of the profit,” explained small-time broker Ko Thet Htwe* in a telephone interview on June 14.

Even after the chaos of the 2021 military coup and rise in petty crime, Yangon’s gold markets remained bustling – even more so thanks to the economic downturn and devaluation of the kyat, with city residents seeking a safe store of value. But today, a hush has fallen over the normally busy street.

In late May, the market price for one tical of gold (16.32 grams) jumped dramatically from K4.8 million to K5.8 million (about US$1,280 at the market rate). In keeping with its other economic policies, the junta responded with a heavy hand to try to stabilise the market, arresting traders accused of breaching harsh price controls.

On June 3, state media announced the arrests of 21 gold shop owners and brokers, and put 10 prominent gold dealers on a wanted list. The regime has done similar things to try to rein in the prices of fuel, property and, most recently, rice. It’s not even the first time it’s cracked down on the gold and related currency markets. In May 2022, at least nine gold and dollar traders were arrested with another 51 detained in June last year.

The regime’s Bureau of Special Investigations, a unit under the home affairs ministry tasked with investigating financial crimes, has led the crackdown. But Thet Htwe said the BSI typically just arrests lower ranking brokers and traders, while the bigger players walk free because they have a close relationship with regime officials, some of whom they bribe.

“Before they [authorities] inspect the market, the traders are warned by their sources in the BSI, so they all have time to avoid it. The big fish are never arrested,” he said. “They only detain owners and brokers from small businesses.”

It’s not clear if the current effort is following a similar pattern. The regime did not disclose any information about the 21 recently arrested businessmen and brokers, including their names. While it issued arrest warrants for some of the biggest names in the industry – including U Myo Thu Win from Academy gold and U Sang Win of the Aung Thamardi gold shop – it has released no updates about whether they’ve been arrested.

What is clear is that this crackdown has spooked the market more than previous ones. Most traders have shut down operations entirely. Some bigger shops have been forced by the regime to remain open, but are rationing gold or only selling impure accessories to limit losses. Meanwhile, the artificial rate has further incentivised a black market, with outbound trade to India booming.

The official reference price imposed by the regime is so far off the market value that small scale brokers like Thet Htwe have been ordered off the streets and told not to communicate with any customers for now.

“We can’t even tell strangers the real price of gold because the guys from BSI are pretending to be customers to arrest brokers.”

Meddling with markets

While the regime has carried out similar crackdowns in the past, the current iteration is the harshest yet. In response, most gold shops have simply closed rather than complying with the official rate set by the Yangon Region Gold Entrepreneurs Association.

The YGEA is a private business association founded in 2008, but even before the coup, it had a close relationship with the government, which effectively outsourced regulation of the gold market to it. But since the military seized power, the junta has lent on the YGEA to enforce increasingly harsh measures, which often go against the interests of merchants.

A gold trader who has a shop on Pabedan Township’s 28th Street explained to Frontier that the YGEA used to announce the gold price four times a day based on the free market value. This was determined by the global gold price and the market dollar rate, as well as local supply and demand. But since the coup, the association has had to announce fixed prices three times a day based on the US dollar exchange set by the Central Bank.

The Central Bank also came under the junta’s thumb following the coup, and has pegged the exchange rate to K2,100 to the dollar, far from the black market rate, which currently sits at around K4,500.

The junta’s attempts to cool the market via the YGEA have therefore created a wider and wider gulf between the reference and actual market price. When the market value jumped to K5.8 million per tical, the YGEA’s fixed rate was only raised to K4.8 million – equivalent to the market rate before the surge. Despite that already huge discrepancy, the regime tamped the price down even more, dropping it to K4.49 million as of July 2.

A gold trader who owns a shop in Mayangone Township told Frontier that the market rate also dropped a bit following the BSI crackdown, from K5.8 million to K5.2 million in the first week of June, but gradually climbed back up to 5.4 million by the third week. However, he said the drop merely reflects the fact that many shops are closed.

“The market has still not gone back to normal. Most of the gold shops have stopped selling pure gold. When the market reopens, the price will go up again,” he said.

As during similar crackdowns on the sale of other goods, the junta accused unscrupulous gold dealers of manipulating the market for personal profit. Known as Lay Pat Kar in Burmese, two gold traders essentially bet on what the price of gold will be at the end of the trading day, with the losing party having to pay the difference between the two prices. The regime alleged that traders were trying to push up gold prices by spreading fake news on social media in order to win Lay Pat Kar bets.

However, the Mayangone trader told Frontier that such bets can’t even be placed in the current environment. With the economy only getting worse, the price of gold can’t decrease, he said, because the devaluation of the kyat encourages people to put their money in other assets – like gold, US dollars and property.

“In this current state, there are more people who want to buy than people who want to sell. No one wants to hold kyat when it becomes nothing more than worthless paper,” he explained.

He said the real reason for the increase in gold prices is much simpler.

Wares displayed at a gold shop in Yangon in June 2022. (Frontier)

“In the last week of May, the global price of gold and the value of the dollar increased, so domestic gold prices increased as well,” he said. “Also, it’s typical for gold prices to increase during the [May to September] rainy season, because the domestic supply drops due to reduced gold mining.”

This would partly explain why similar arrest campaigns were conducted around the same time in the previous two years as well.

A business consultant based in Yangon agreed that speculators are not the main reason for prices going up, and said once prices start increasing they can be difficult to bring back down, because people panic and try to buy more.

“Of course there would be some speculators. But they are not the main reason as the regime alleges. If an item is already scarce and the price is certain to rise, traders will hoard the item. That is their right and no one can control that. Market crackdowns like arresting people and confiscating goods are not the answer. When an item is scarce, if you can make it more abundant, the price will drop by itself,” he said.

Missing dollars

But the regime has effectively built a house around itself with no exit.

In Myanmar’s economy, gold and US dollars are closely linked, because both are a means to offload the volatile and devalued kyat. But dollars have become increasingly scarce due to economic sanctions, a lack of foreign investment, a decline in exports and other financial problems since the coup. To avert a balance of payments crisis, the regime has hoarded the currency and obligated exporters and migrant workers to exchange their foreign earnings for kyat at unfavourable rates.

With most ordinary people unable to access dollars, more are turning to gold, driving up prices even more.

Economist U Sein Htay told Frontier that the Central Bank normally tries to strengthen the kyat by selling foreign currency from its reserves, as it did regularly in the months following the coup. But with these reserves dwindling, it can now do so only sparingly.

Until 2019, he served on the economics committee of the National League for Democracy, the party whose government was overthrown by the coup.

In tandem with its crackdown on the gold market, the regime has targeted people involved in the hundi network – an informal money transfer system used by migrant workers to send remittances back to their families, bypassing banks and mobile money providers regulated by the Central Bank.

On May 30, the Central Bank announced that it had arrested 12 hundi agents and closed 74 bank accounts suspected of serving as illegal transfer hubs.

That same week, Central Bank chair Daw Than Than Swe summoned officials from four Thai banks operating branches in Yangon – Siam Commercial Bank, Bangkok Bank, Kasikorn Bank and Krung Thai Bank – and urged them to cooperate in cracking down on the hundi market, by ensuring that remittances from Myanmar migrants in Thailand are only being sent via official channels.

A source from the Myanmar Overseas Employment Agencies Federation told Frontier that the regime’s labour ministry has also been pressuring agencies to submit receipts proving that overseas workers have sent 25 percent of their income through formal banking channels, as mandated by a policy introduced last year.

“They said by June 28 we need to submit the bank transaction receipts of the workers who we sent abroad, for the period from September to December last year,” he said.

“How is that possible? We can’t tell the workers which channels to use to transfer their money. They can do whatever they want with their own money. The ministry said they will suspend our licences if we don’t submit in time. We don’t know how we’ll solve this problem.”

The source predicted the agency would have to suspend operations, but did not answer his phone after the June 28 deadline to confirm.

Sein Htay concluded that the military regime has no way of fixing the economy, because the problems are fundamentally political rather than financial.

“There’s no solution for the economy for as long as the political crisis is unresolved,” he said.

The market finds a way

But while the crackdown has blunted Myanmar’s domestic gold market, it has also spurred smuggling to other countries.

“If the traders can’t trade freely inside the country anymore, they will just sell gold to foreign markets illegally,” the 28th Street trader said. “Now they’re sending their gold to the Indian market.”

This is an acceleration of a trend that pre-dated this year’s crackdown, as previously covered by Frontier.

In 2022, The New Indian Express reported that the border with Myanmar was emerging as the “main route” for smuggling gold into India. The Indian government said about 37pc of the 833 kilogrammes of illegally imported gold seized during the 2021/2022 fiscal year came from Myanmar.

But the YGEA and the regime have worked hard to spin a parallel universe where the domestic market is functioning normally. The YGEA has been regularly posting photos on Facebook of gold shops with long lines. The shops that remain open, seemingly under duress, include those whose owners have been put on the wanted list, like Zwe Htet, Academy and Aung Thamardi.

But gold traders said the shops only have long lines because they are dealing a very limited amount of pure gold to limit losses.

“The shops only sell 1 pae [about 1 gramme] per person and tell people they have to wait because there’s a shortage of pure gold,” said a source who recently went to the Zwe Htet shop in Pabedan. “I was waiting in the queue from noon and only entered the shop in the evening.”

Some shops have exploited a loophole through the sale of less valuable, impure accessories like gold jewellery. The gold trader in Mayangone said shops are following the YGEA’s reference rates for any gold used in an item, adjusted based on the karat measurement, but adding an extra charge called an ayok twat for the workmanship.

“For example, if you buy a 1-tical gold necklace, the normal ayok twat would be 1 pae’s worth [about K325,000 at the market rate]. But because the YGEA is making them sell at their set price, the shops have increased the ayok twat to 3 or 4 pae in order to equal the actual market rate,” he explained.

But most people who want to convert kyat to more stable assets only want pure gold, because it maintains its value better.

Ma Tar Tar*, who works for an insurance company in Yangon, said she used to immediately buy one or two pae of pure gold after receiving her monthly salary.

“If I have K1 million in my hand, its value could decrease in a moment… That’s why I would change my money to gold, which increases in value over time,” she explained. “As for US dollars, it’s rare to find them on the market now, and since it’s paper it can be damaged easily. If you try to resell damaged dollars, the buyers reduce the price.”

But these days, she’s stuck holding her kyat, waiting for the gold shops to reopen.

“It’s very painful for people like us, when gold is the only asset we can buy that won’t decrease in value.”

*indicates the use of a pseudonym for security reasons

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