Gold's US$4,100 slide may not mean cheaper gold for Malaysians [WATCH]

KUALA LUMPUR: The sharp correction in international gold prices may not translate into equally steep savings for Malaysian consumers, as the ringgit, type of gold product and seller spreads also determine local retail prices.

Spot gold fell as much as four per cent on Monday to around US$4,111 an ounce, its lowest level since August 5, amid rising US Treasury yields and expectations of further Federal Reserve (Fed) rate hikes.

It traded around US$4,100 on Tuesday before recovering modestly later in the week.

Abdul Razak Gold House (M) Sdn Bhd managing director Mohd Razalie Abdul Rasul said the current decline reflected factors such as interest rates and oil prices.

He reminded Malaysians that international gold prices did not directly determine retail prices.

Mohd Razalie said consumers should look beyond weekly price movements when deciding whether to buy or hold gold.

"A lower international price does not automatically mean a lower price at the counter. The ringgit, the product and the seller's spread all change what a Malaysian actually pays or receives.

"A falling price should prompt questions, not reactions," he said.

Razalie said the correction should also be viewed in the context of gold's longer-term role as a store of value.

"What we are seeing today is a market reacting to interest rates and oil, not a market that has stopped being used as a store of value.

"Those are two different things, and it is important not to confuse them," he said.

SPI Asset Management managing partner Stephen Innes said the main pressure on gold this week had been the rise in US real yields, reinforced by a more hawkish Federal Reserve backdrop.

Whether the correction becomes more sustained, Innes noted that this would depend largely on the Federal Reserve and real yields.

"If real yields keep climbing and the Fed stays hawkish, gold could remain under pressure.

"If yields stabilise, some of that pressure should begin to ease," he told the Business Times.

Upside Capped By Hawkish Fed Bets

Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said the near-term upside for gold prices appeared somewhat limited as market sentiment remained tilted towards a higher interest-rate environment.

"The fear now is whether the Fed would become more hawkish following the stubbornly high inflation rate with the latest PCE inflation rate sustained at 3.4 per cent during August.

"This could mean the Fed would be inclined to raise rates further to curtail inflationary pressures," he said.

Afzanizam added that the correction could nevertheless provide an entry point for those seeking exposure to gold, particularly given the price's ability to establish a new support level.

"I suppose this could be a good entry point for those who wish to invest in gold.

"What we noticed, despite gold prices having fallen from the all-time high of 5,500 per ounce in the first quarter of 2026, the prevailing gold prices have established a new support base of US$4,000 per ounce.

"This is commendable and the correction from the all-time high level can be deemed healthy as the market adjusts to its so-called new equilibrium price," he said.

Afzanizam added that demand for gold was likely to remain healthy, leaving room for prices to rebound, although investors' holding power, entry points and investment horizon remained important considerations.

For Malaysian investors, Innes said movements in the ringgit would determine how much of the international price decline was reflected domestically.

"A weaker ringgit can cushion some of the decline in US-dollar gold, while a stronger ringgit will make the fall more noticeable locally," he said.

Innes cautioned investors against attempting to pick the exact bottom while real yields remained elevated.

"The recent drop does make gold cheaper than it was a week ago, but investors should still be careful about trying to pick the exact bottom while real yields remain elevated.

"For anyone looking to add exposure, a gradual approach probably makes more sense than going in all at once," he added.

Rate Pressure, Ringgit Cushions Fall

Tradeview Capital fund manager Neoh Jia Man said gold's recent weakness is largely driven by expectations of further interest rate hikes.

As gold does not generate income, higher interest rates increase the opportunity cost of holding the precious metal compared with yield-bearing assets such as US Treasuries, he added.

Neoh said Treasury yields are now at multi-year highs.

With energy prices remaining elevated amid the ongoing conflict involving Iran, markets are pricing in further US Federal Reserve rate hikes in the coming months.

This has resulted in gold falling alongside bonds, rather than performing its traditional role as a hedge.

"Nevertheless, we believe gold remains one of the few effective long-term hedging assets.

"While prices could remain volatile in the near term, investors should continue to maintain a small allocation to gold as part of a diversified portfolio.

Neoh said a stronger US dollar raises the ringgit value of gold, partly cushioning Malaysian investors from declines in global gold prices.

Against this backdrop, he viewed the recent pullback in gold prices as creating reasonable entry points for both consumers and long-term gold investors.