By AFIQ AZIZ / Pic By MUHD AMIN NAHARUL
GOLD prices are expected to remain under pressure despite heightened interest in the precious metal as a safe haven, with analysts forecasting prices to tumble below US$1,600 (RM6,576) per troy oz.
OCBC Bank economist Howie Lee attributed the negative view to the continued rise in US Treasury yields and global economy’s anticipated recovery following the global rollout of Covid-19 vaccines.
“A rapidly improving global economy supported by robust data prints and a firm dollar is inhibiting gold’s appeal. We think it may see a further downside at US$1600 for now,” he told The Malaysian Reserve.
Several media outlets recently reported a buying frenzy in gold jewellery, including those who took advantage of the Employees Provident Fund’s (EPF) i-Sinar withdrawal scheme, as many view gold as a safe haven in times of crisis.
Under the i-Sinar scheme, EPF members with a balance of less than RM100,000 in their Account 1 can withdraw a maximum of RM10,000, while those with a balance of more than RM100,000 can withdraw a maximum of RM60,000.
A recent study by the UCSI Poll Research Centre reported that almost half of the people in the top 20% income group said they have used, or will use, their i-Sinar withdrawal to invest in gold and stocks.
Additionally, some 31.1% from the middle 40% income group and 35.5% from the bottom 40% income group gave the same response.
Most of the survey’s 809 respondents were aged between 40 and 55. Despite the lower projection for gold prices, Lee does not see gold falling back to US$1,000- US$1,200 levels, even in a bearish environment.
“In fact, if the long-term US Federal Reserve fund rate does end at only 2%, we expect gold to stabilise at around the US$1,500 level,” Lee said.
AxiCorp Financial Services Pte Ltd chief global market strategist Stephen Innes, in a note, said the heightened trading of US yields and the dollar had sent gold prices reeling in recent months.
“The interest-rate pressure is likely to be a more extensive and nearer-term factor rather than the positive force of expected inflation, suggesting gold may head lower when interest rates shoot up again,” he said.
“This week’s US bond auction and supply present a clear danger for gold investors. Buckle in if the auction results tail poorly as it could be a reasonably steep drop for gold prices,” he added.
Gold prices have fallen consistently since Feb 25 and have been mainly on the defensive all year, shedding as much as US$270/oz, since hitting a year-to-date high of US$1,959/oz on Jan 6.
“The jump in the US dollar and 10-year yields last Friday, following the better-than-expected February monthly payroll number, initially looked like gold was about to fall through the trap door,” Innes said.
“But later in the day, gold managed to pare losses and stabilise in line with softening US yields and ended the week bobbing around US$1,700/oz,” he added, attributing the performance to end of week profit-taking and short-covering.
“The market may have fallen too steeply, too quickly. Gold has been undercut by cheerful economic optimism over a robust economic recovery and faster than anticipated rises in bond yields,” he said.