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

KUALA LUMPUR: A significant drop in global gold prices may not lead to equally substantial savings for Malaysian consumers, as the value of Malaysian currency, the product type, and seller spreads also influence local retail prices. On Monday, spot gold fell by a maximum of four per cent to approximately US$4,111 an ounce, marking its lowest level since August 5, driven by increasing US Treasury yields and expectations of additional Federal Reserve (Fed) rate hikes.

The price hovered around US$4,100 on Tuesday before experiencing a slight recovery later in the week.

Abdul Razak Gold House (M) Sdn Bhd managing director Mohd Razalie Abdul Rasul noted that the current decline was influenced by interest rates and oil prices. He emphasized that international gold prices do not directly determine retail prices in Malaysia. Malaysians should consider factors beyond weekly price movements when deciding to buy or hold gold.

A lower international price does not automatically result in a lower price at the counter. The ringgit, product type, and seller's spread all impact what a Malaysian pays or receives. Rasul suggested that the decline should prompt questions rather than immediate reactions.

Rasul also emphasized that the correction should be viewed in the context of gold's role as a store of value. He clarified that the current market reaction to interest rates and oil prices is different from the metal ceasing to function as a store of value.

Stephen Innes, managing partner of SPI Asset Management, attributed the main pressure on gold this week to the rise in US real yields, influenced by a more hawkish Federal Reserve outlook. Innes suggested that the correction's sustainability would largely depend on the Federal Reserve and real yields. He stated that if real yields continue to rise and the Fed maintains a hawkish stance, gold could remain under pressure. Conversely, if yields stabilize, some of the pressure should begin to ease.

Dr Mohd Afzanizam Abdul Rashid, chief economist at Bank Muamalat Malaysia Bhd, noted that near-term upside for gold prices appeared limited due to market sentiment favoring higher interest rates. The recent inflation rate of 3.4 per cent in August suggested the Fed might raise rates further to curb inflationary pressures, potentially leading to a more hawkish stance.

Afzanizam noted that despite gold prices falling from an all-time high of $5,500 per ounce in the first quarter of 2026, a new support level of $4,000 per ounce had emerged. This correction appeared healthy as the market adjusted to a new equilibrium price. He added that demand for gold was likely to remain robust, which could facilitate price rebounds, though investors should consider factors like holding power, entry points, and investment horizon.

For Malaysian investors, Innes highlighted that movements in the ringgit would determine how much of the international price decline would be reflected domestically. A weaker ringgit could offset part of the decline in US-dollar gold, while a stronger ringgit would make the fall more apparent locally. Innes cautioned against attempting to pinpoint the exact bottom while real yields remained elevated. He advised investors to adopt a gradual approach to adding exposure to gold rather than investing all at once.