Gold prices fall 21 per cent in two months despite rising geopolitical tensions

SHAH ALAM - The price of physical 999 gold in Malaysia has declined by approximately 21 per cent in less than two months, falling from RM764 per gramme on Jan 29 to around RM601 as of March 24.

The decline was seen as unusual for an asset commonly viewed as a safe haven, as gold typically gains strength during periods of geopolitical uncertainty, making the price drop amid escalating tensions in West Asia particularly unexpected.

However, recent global market movements show spot gold slipping 3.3 per cent to US$4,340.09 per ounce, equivalent to roughly RM549 per gramme, marking nine consecutive sessions of decline and the lowest level in about four months.

Within a week alone, prices were reported to have fallen by more than 10 per cent, reinforcing a trend that diverges from the traditional pattern associated with geopolitical uncertainty.

Gold investment analyst Syukor Hashim attributed the development to indirect effects of the conflict, which have driven higher energy prices such as oil and gas, contributing to rising global inflation.

“This situation negatively affects gold because the metal does not provide interest returns. When interest rates are high, investors are more inclined to shift to financial instruments such as bonds or interest-bearing savings.

“At the same time, expectations for interest rate cuts are diminishing, which increases selling pressure on gold,” he said.

Concerns over the strategic Strait of Hormuz have also heightened expectations that oil prices could remain above US$110 per barrel, potentially increasing transportation and manufacturing costs while accelerating inflationary pressures worldwide.

“Fundamentally, gold typically sees high demand during crises.

“However, in the current environment, macroeconomic factors such as interest rates and the strength of the United States dollar are exerting greater influence on market direction,” Syukor added.

The shift in global investment trends has seen funds moving from gold to higher-yield assets, compounded by the strengthening US dollar, which continues to weigh on prices.

In Malaysia, the decline has significantly affected investors’ holdings. For example, 10 grammes of gold purchased at peak prices have seen its value drop from RM7,640 to RM6,010, reflecting a paper loss of RM1,630.

Globally, gold prices have fallen from approximately RM630 per gramme at the end of January to about RM549 currently, equivalent to a decline of around 12.8 per cent.

The development suggested that the current fall in gold prices is driven less by weakening demand and more by shifting global investment priorities influenced by high interest rates and a stronger US dollar.