Given the recent pullback in gold prices, we expect the market to consolidate as investors await further cues from upcoming CPI data, while monitoring developments such as the U.S. government shutdown, geopolitical tensions, and USD strength. That said, investors with a positive view on gold may consider accumulating on weakness, supported by the following factors:
- Inflationary Environment Driven by Debt Management
The current global economic landscape, marked by significant levels of global debt (exceeding 235% of global GDP), suggests that policymakers may favor strategies that lead to moderate, sustained inflation. This approach aims to gradually reduce the real value of extensive debts, as aggressive measures to combat inflation, such as sharp interest rate hikes, could risk a broader financial crisis. In this context, gold functions as an essential safeguard against the depreciation of currency and purchasing power.
- Strategic Asset for Central Banks
A significant shift in the perception of gold has occurred, particularly among non-Western central banks. The freezing of Russia’s foreign reserves demonstrated the vulnerability of traditional reserve assets. Consequently, gold is increasingly viewed as a truly neutral and secure reserve asset, leading to a new wave of strategic demand from central banks globally. This institutional demand creates a robust “strategic value floor” for gold.
- The balance of potential risks and rewards indicates a probable long-term upward trend
While short-term market fluctuations and speculative bubbles may lead to corrections, the fundamental drivers of central bank demand and the need to hedge against systemic inflation point towards a long-term upward trend for gold. Its role has evolved from a simple inflation hedge to a fundamental strategic asset in the current economic paradigm.
Investors interested in gaining exposure to gold may consider exploring selected gold funds offered on our platform. Please click on the link to learn more or email us at cse.my@phillipcapital.com.my if you require any further information.
Disclaimer
The information contained herein does not constitute an offer, invitation, or solicitation to invest in any product or service offered by Phillip Capital Management Sdn Bhd (“PCM”). No part of this document may be reproduced or circulated without prior written consent from PCM. This is not a unit trust or collective investment scheme and is not an obligation of, deposit in, or guaranteed by PCM. All investments carry risks, including the potential loss of principal.
Performance figures presented may reflect model portfolios and may differ from actual client accounts’ performance. Variations in individual clients’ portfolios against model portfolios and between one client’s portfolio to another can arise due to multiple factors, including (but not limited to) higher relative brokerage costs for smaller portfolios, timing of capital injections or withdrawals, timing of purchases and sales, and mandate change (e.g., Shariah vs. conventional). These differences may impact overall performance.
Past performance is not necessarily indicative of future returns. The value of investments may rise or fall, and returns are not guaranteed. PCM has not considered your investment objectives, financial situation, or particular needs. You are advised to consult a licensed financial adviser before making any investment decisions.
While all reasonable care has been taken to ensure the accuracy and completeness of the information contained herein, no representation or warranty is made, and no liability is accepted for any loss arising directly or indirectly from reliance on this material. This publication has not been reviewed by the Securities Commission Malaysia.
