KUALA LUMPUR: Gold prices are currently under pressure due to market liquidation, rising real yields and temporarily delayed physical demand, rather than a breakdown in the long-term macroeconomic outlook, according to an analyst.
SPI Asset Management managing partner Stephen Innes said gold is currently caught in a transition phase as investors misread the broader macroeconomic “endgame”, or the eventual shift towards monetary policy easing, Bernama reported.
“We are not operating in a low-debt, high-flexibility world. We are operating in a balance-sheet-heavy system where tightening works quickly and breaks things quickly. The market is still clinging to the idea that central banks can hike with impunity, as if this system can absorb higher rates without consequence,” he said in a note.
According to Innes, higher interest rates have intensified pressure across credit markets, equities and economic growth, particularly in a global financial system heavily reliant on debt and leverage.
“The longer rates stay restrictive, the more pressure builds in credit, equities and growth, and that is exactly the setup that eventually forces the pivot,” he said.
Innes said once monetary policy pivots and yields begin to decline, gold is expected to regain strength as investors return to the precious metal as a hedge against economic uncertainty.
“Gold is not failing. It is being liquidated in a market that is misreading the endgame,” he said.
Earlier in Saturday, Turkiye’s state-run news agency, Anadolu Agency, reported that the price of gold saw its biggest weekly drop since 1983, falling more than 10% to below the US$4,500 (US$1=RM3.933) threshold on Friday.
Still on gold, OCBC Group Research, in a recent note, stated that elevated geopolitical risks, policy uncertainty, and concerns about global growth have historically supported demand for gold as a defensive asset.
The firm said that, at the same time, continued central bank diversification into gold and a broader base of investor participation should continue to provide a structural support for gold.
“On the other hand, the narrative can be challenging for gold in the near term. A sharp rise in energy prices risks reigniting inflationary pressure.
“If inflation proves more persistent, monetary easing could be delayed or reversed. In such a scenario, nominal yields and real interest rates would likely stay elevated, tightening global financial conditions and, in turn, setting an unfavourable environment for gold bulls,“ the bank-backed research firm said.
As a result, OCBC Group Research said, the current environment creates tension for gold.
“While demand for safe-haven stays intact, rising real yields and stronger demand for dollar liquidity could limit the upside for gold in the near term.
“This also explains why gold has largely traded range-bound, following the decline in gold prices on the onset of the US/Israel-Iran war,“ the research firm said.
OCBC Group Research also said that while the broader buying trend remains, the pace of purchases moderated in January.
According to data compiled by World Gold Council and central banks bought a net five tonnes in January (versus a monthly average of 27 tonnes in 2025). Some of the top sellers were Kazakhstan and Russia, while Uzbekistan was among the top buyers.
Data also showed a broadening of the demand base, with Bank Negara Malaysia making its first net purchase since 2018 and Bank Indonesia adding to gold purchases.
China has continued its gold-buying streak for the 16th straight month in February, OCBC Group Research said.
The report also indicated that the Bank of Korea signalled plans to resume investing in a physical gold exchange-traded fund, marking its first purchase of a gold-related financial product since 2013.
“While there were earlier chatters that Poland (the biggest official sector purchaser of gold on reported terms in 2025) planned to use unrealised profit on gold reserves to finance military spending, this was later refuted by National Bank of Poland governor Adam Glapinski, adding that the government has expressed ‘zero interest’ in the proposal,“ the research firm said.
Looking ahead, OCBC Group Research said gold is often seen as a beneficiary of stagflation (an environment of slowing growth, persistent inflation and high unemployment), but the relationship is not always straightforward.
The firm said that historically, gold has tended to perform well when inflation is elevated and growth weakens, particularly when real yields decline and confidence in the policy framework deteriorates.
However, the experience in 2022 (Russia-Ukraine war) illustrates why the details matter.
“Despite rising inflation and mounting recession concerns (conditions that are often associated with stagflation), gold prices actually declined for much of that year as the Fed tightened policy aggressively, pushing real yields sharply higher.
“In other words, it is not stagflation per se that drives gold, but that the path of real rates matters.
“When inflation rises, but central banks respond forcefully, and real yields move higher, the opportunity cost of holding gold increases and gold prices can come under pressure,“ OCBC Group Research said.
