KUALA LUMPUR: Gold prices are expected to remain subdued in the near term as elevated inflation and higher-for-longer US interest rates weigh on investor demand, before recovering next year if slower economic growth prompts the US Federal Reserve to ease monetary policy, according to Go Capital Growth Sdn Bhd CEO Fong Pok Yee.
Fong said the company expects gold prices to “move lower first” before potentially rebounding next year as tighter monetary policy begins to weigh on economic growth.
“For the gold forecast, we are seeing that the gold price, because now getting hit by the oil price and also the inflation, so it’s likely that the gold price will move lower first,” he told reporters at the launch of Pos ArRahnu Gold-i, a new digital gold investment platform by Pos Malaysia, today.
“We stay at the low side this year, probably around US$3,800 per ounce to US$4,200 per ounce.”
Fong said the expected trend would be for gold prices to decline initially before staging a recovery next year.
“So what we’re basically thinking about the trend is the gold price will move lower first before they move higher next year,” he said.
In ringgit terms, Fong expects gold prices to trade between RM450 and RM520 per gram.
“In terms of grams, it can fall between RM450 and RM520,” he said.
Fong explained that the expected weakness in gold prices would largely be driven by the Federal Reserve’s response to inflationary pressures.
“The reason is when inflation is hitting, the US side is going to increase the interest rate. If they increase the interest rate, the gold price is going to remain at a low side,” he said.
However, Fong believes the current period of subdued prices could eventually give way to stronger performance as higher borrowing costs begin to slow economic activity.
“Because of inflation, it’s going to take some time to kick into the economy. And when the Federal Reserve raises the interest rate, it’s going to have a drag on the economy,” he said.
Fong said the Federal Reserve may eventually need to lower interest rates if economic growth slows following a prolonged period of monetary tightening, creating a more favourable environment for gold prices.
“Then during that time, the economy is not performing well. Probably by next year, if the economy is not performing well, then the gold price may move higher,” he said.
