iFast Capital's Khaw expects the price of the precious metal to remain above US$4,000 over the next 12 months.
PETALING JAYA: Analysts say the pullback in gold price by close to 8% overnight on Tuesday may be a signal of macro volatilities subsiding besides profit-taking by investors.
At press time, the price of gold was hovering around US$4,157 an ounce compared with its Tuesday high of US$4,378, having fallen to as low as US$4,035 early yesterday.
According to CIMB Research, the precious metal saw its steepest daily price drop in five years amid profit-taking and easing US-China tension, after President Donald Trump signalled optimism for a fair trade deal with China’s leader Xi Jinping.
He was reported to be expecting to achieve a deal with China ahead of his proposed meeting at the end of the month with Xi.
“I think we are going to end up having a fantastic deal with China. It is going to be great for both countries, and it is going to be fantastic for the entire world,” said Trump.
Rakuten Trade head of equity sales Vincent Lau pointed out that investors would usually see gold as a safe haven in uncertain times and Trump’s comments could indicate a calm macro atmosphere.
“We believe this will be healthy for the FBM KLCI, although in recent times, the general belief that gold prices should be moving inversely with equity and bond prices appears to not be the case now,” he told StarBiz.
On the S&P 500 index which has continued its steady upward trend despite the surge in gold price, he said investors had adopted a risk-on approach.
In addition, he said further rate cut expectations by the US Federal Reserve (Fed) is also propping up equity markets worldwide including Bursa Malaysia.
“This is all the more important when we realise that the FBM KLCI has recorded net outflows of over RM18bil year-to-date, so if the Fed goes according to expectations and further lower rates, the outflow from our local index can be mitigated,” said Lau.
iFast Capital assistant manager of research Kevin Khaw agreed with Lau, noting that the gold price trip indicated a shift toward a risk-on sentiment, which may benefit Malaysian equities, as investors rotate from safe-haven assets to risk assets such as stocks.
“We believe this positive development could trigger renewed interest in undervalued segments of the Malaysian market, particularly given how much the market has been depressed since July 2024.”
As for the bond market, Khaw did not see the recent movements in gold or the US dollar altering his outlook.
“The rise in opportunity cost from holding gold reinforces the appeal of interest-bearing assets such as Malaysian government bonds that offer yields of around 4%,” he added.
He described the retracement in gold price as being driven by profit-taking activities but the de-dollarisation trend among global central banks, coupled with a weakening greenback, meant that gold prices would have continuous support.
He expected prices for the precious metal to remain above US$4,000 over the next 12 months.
According to Khaw, the current efforts to attract more investors to the local bourse are moving in the right direction.
“As highlighted under the Malaysia Madani framework, the economic transformation agenda is progressing well with both foreign and domestic direct investment inflows forming a strong foundation for sustained growth.
“While external headwinds may limit corporate earnings growth, we believe that monetary and fiscal support measures including the pre-emptive Overnight Policy Rate cut, lower Statutory Reserve Requirement, the various growth initiatives, and ringgit stabilisation efforts would provide a supportive backdrop for the equity market,” he added.
Given the year-to-date underperformance of local equity market, much of the downside risk appeared to have been priced in.
Khaw anticipated improving corporate earnings, continued capital deployment by local institutions, consistent policy direction as well as the onset of the US rate-cut cycle to encourage fund flow rotation into emerging markets and Malaysia poised to benefit from the spillover.
Head of dealing at Moomoo Malaysia Ken Low expected gold bullion prices to remain elevated. Seasonal factors, such as the end of Diwali, which impacted gold demand in India, also played a role in terms of prices, he added.
For Malaysian equities, Low said the relative underperformance, versus global indices like the S&P 500, reflected structural differences.
He pointed out that the FBM KLCI is still highly weighted towards mature sectors but lacks high-growth tech names that had driven US market gains.
“To attract more investors, Bursa can focus on repositioning value and income themes for long-term investors amid global rate normalisation. It can showcase sectoral growth stories in clean energy, semiconductors and data infrastructure.
“Expand the product landscape to include thematic exchange-traded funds and structured alternatives to broaden participation,” said Low.
