KUALA LUMPUR: The price of gold is intricately woven into the fabric of global events and escalating geopolitical tensions, particularly in the Middle East and between China and Taiwan, are among the key drivers that can push the precious metal towards new highs.
"Gold price has seemed to be inversely correlated to the US dollar over the past year. The US dollar's recent retreat paved the way for gold prices to breach the US$2,000 per ounce mark.
"It is also partly fuelled by fears of a recession triggered by tight monetary policy," said independent economist Julian Suresh Sundaram.
Historically, gold has been a safe-haven asset, closely mirroring real bond yields. But as investors flock to the metal amid economic uncertainties, experts caution against overlooking the opportunity cost of holding non-yielding gold.
"Central bank purchases doubled last year compared to 2022, contributing significantly to the current price surge," said Tradeview Capital Sdn Bhd vice president Tan Cheng Wen.
"While expensive in real terms at current prices, it's still above the average production cost of US$1,300. Continued buying by central banks may further muddle the outlook," he added.
Interestingly, conflicts such as the Ukraine-Russia war and troubles in Africa and South America have had minimal impact on gold prices, highlighting the selective influence of geopolitical events on its value.
More Malaysian investors are turning to gold for stability amid global economic uncertainties, said Habib Group executive chairman Datuk Seri Meer Sadik Habib.
He emphasised how changes in the US dollar and interest rates could cause fluctuations in the gold price.
"The price is directly connected to the international market, especially the US. Inflation fears due to global tensions play a significant role."
Meer Sadik pointed out the Ukraine-Russia and Israel-Gaza wars as key factors affecting volatility.
He said in Malaysia, gold served both as a lucrative investment asset and a cultural adornment.
Despite the rise in gold price, Meer Sadik said Malaysians were choosing gold bars as a strategic investment option.
He also expects gold prices to remain steady or rise further this year.
"And despite the looming luxury tax, as announced in the 2024 Budget, Habib Group remains committed to its core jewellery business."
With gold prices reaching new highs, Malaysians are increasingly turning to pawn shops as a quick fix for dwindling savings.
Ng said it was "fortunate" as those who needed funds and had gold assets could liquidate them for cash, given the current high price.
