RALLY LIKELY TO CONTINUE
Could gold’s run be indicative of a looming economic crisis? UOB’s Mr Heng does not think so.
Though there is a slowdown in the US job market, he said that he does not anticipate a “full-fledged” recession either in the US or across Asia.
“In general, Asian economies have done well this year despite the sharp rise in US trade tariffs,” said Mr Heng, adding that China’s gross domestic product growth is also expected to stabilise at around 5 per cent.
“Overall, Asia’s growing regional trade and rising domestic consumption are supportive of regional economies, and we do not see an economic recession on the horizon.”
While there may be some bumps in the road ahead for gold, prices of the precious metal are expected to continue rising, said analysts.
“A short-term corrective pullback is not ruled out, especially if the US government shutdown ends quickly,” said OCBC’s Mr Wong.
Gold’s sharp run-up in a short period of time – more than 7 per cent in two weeks – and long positions seen in Commodity Futures Trading Commission data do suggest some risks of overbought conditions, however, the structural drivers are still supportive of gold prices, he added.
Similarly, Julius Baer’s Mr Menke said that the rally is underpinned by longer-term fundamentals rather than short-term speculation.
“Considering the past two weeks’ price performance, speculative futures positioning has likely turned more bullish, with trend followers and technical traders entering the market in the run-up to the US$4,000-per-ounce milestone,” said Mr Menke.
A halt to this record run is unlikely to come from policy tightening or improving economic prospects, he added.
“Considering that the US Federal Reserve just resumed its easing cycle, we see a very limited likelihood for such a scenario,” he said.
A plausible pause may instead be attributed to “speculators’ fatigue” – that all of the good news has been priced in and the latest leg of the rally is a case of “too fast, too far”, he said.
“That said, such fatigue should not cause a correction but rather a short-term and temporary setback, as we still see a favourable fundamental backdrop for gold,” Mr Menke added.
“The cooling US economy, paired with the prospects of lower US interest rates and a weaker US, should continue luring safe haven seekers into the market.”
Mr Heng said that given “all the key long-term positive drivers” for gold and the surge in retail investment interest in it, UOB had raised its forecasts for the precious metal to US$3,900 for the fourth quarter of this year, and US$4,000, US$4,100 and US$4,200 for Q1, Q2 and Q3 of 2026, respectively.
Mr Menke, meanwhile, said that Julius Baer expects the buying of gold to continue for another three to five years, and had adjusted its three- and 12-month price targets for the commodity to US$4,150 and US$4,500, respectively.
