KUALA LUMPUR: Gold’s long-term bullish outlook remains firmly intact despite one of the steepest weekly declines on record, with United Overseas Bank (UOB) projecting that prices could eventually rise to US$5,000 per ounce as safe-haven demand and diversification needs persist.
UOB noted that the next phase of the gold rally is likely to be more gradual and sustainable, following the sharp, parabolic surge in recent months. The bank characterised the recent sell-off as a “healthy and necessary reset” to cool overheated speculative positions, paving the way for a more stable uptrend ahead.
The bank described the recent sell-off as a “healthy and necessary reset” to cool overheated speculative positioning after months of parabolic gains.
Spot gold plunged from nearly US$4,400 an ounce on Oct 20 to below US$3,900 within a week – a drop of about US$500 per ounce, the largest weekly fall on record. The correction followed a three-month rally of more than 25 per cent, after prices broke through the key US$3,500 psychological barrier in August.
UOB said the sharp retracement was “very much necessary” to unwind excessive speculative long positions that had built up since mid-year. Data from Comex indicated that net non-commercial long positions were near record highs in early October, underscoring stretched sentiment before the correction.
“This net long positioning is likely to have jumped to a new record high by late October. However, the latest weekly positioning data across October is unavailable, as it was delayed due to the US Federal Government shutdown,” UOB said in a note.
Despite the pullback, UOB emphasised that core demand fundamentals for gold remain robust, underpinned by sustained central bank accumulation and strong investor inflows across multiple asset classes – from bullion and futures to ETFs.
These include strong, consistent central bank allocation and strong investor purchases of gold across various investment products ranging from physical gold bullion to futures to ETFs. The total amount of gold ETF holdings has now risen to almost 100 million ounces, valued just under US$400 billion, with room to rise further, UOB noted.
At the same time, on-warrant inventories at the Shanghai Futures Exchange have surged to about 90 tonnes, up from less than 20 tonnes in July, reflecting persistent physical demand in China.
UOB said these trends reflect a shared driver, the need for safe-haven diversification amid a volatile de-dollarisation environment and ongoing geopolitical tensions.
“The latest de-escalation of US-China trade tension is encouraging and likely to have contributed to the recent correction in gold. But this does not change the long-term risk of ongoing trade tensions and geopolitical risk from the US, as the Trump administration sought to raise tariffs further as it positions for more sectoral tariffs and other non-trade-related measures ahead.”
Technically, UOB identified US$3,751 an ounce, the baseline of the weekly Ichimoku cloud, as a solid support level for prices.
Analysts: Correction Creates Room for Next Rally
Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid concurred that the recent correction is a healthy pause, allowing the market to stabilise after an overheated run-up.
The correction helps remove market imbalances as some players lock in profits, he told Business Times.
He said several factors justify a continuation of gold’s upward trajectory.
“Concerns over the status of the US dollar as a safe haven currency given that the US government is no longer an AAA-rated country. Hence, traders and investors will be looking for substitutes, and in this case, gold really fits the profile given its intrinsic value,” he said.
He added that global central bank demand for gold has expanded by about 20 per cent per annum from 2010 to 2024, reflecting accelerating de-dollarisation efforts.
ETF investors have piled into gold in the past two quarters this year after experiencing net sales in the last four consecutive quarters. Hence, the prospect for higher gold prices is clearly visible.”
However, he cautioned that intermittent corrections are likely as part of gold’s longer-term upward cycle.
Global Demand at Record High
The World Gold Council (WGC) reported that global gold demand hit a record 1,313 tonnes in the third quarter of 2025, driven by strong investment flows.
Investors remained firmly in the driving seat, with large ETF inflows and strong bar and coin investment, the WGC said in its latest Gold Demand Trends Q3 2025 report.
Central banks purchased a net 220 tonnes of gold during the quarter – 28 per cent higher than the previous quarter and 6 per cent above the five-year average – as they diversified reserves away from the US dollar.
The WGC expects investment demand across ETFs, bars, and coins to remain elevated in the quarters ahead, reinforcing the sector’s long-term bullish trajectory.
Reflecting the resilient fundamentals, UOB has raised its gold price forecasts by US$100 per ounce per quarter through mid-2026.
The bank now projects gold to hit US$4,000 an ounce by the fourth quarter of 2025 (4Q25), US$4,100 an ounce by 1Q26, US$4,200 an ounce by 2Q26 and US$4,300 an ounce by 3Q26.
The prevailing spot price stands around US$3,950 per ounce.
While UOB remains upbeat, it cautioned that short-term volatility may persist due to uncertainty surrounding US Federal Reserve policy.
“It is important to note that while the long-term fundamentals remain positive, the risk of further near-term correction remains given the uncertain outlook of Fed monetary policy.
Following a 25-basis-point rate cut in October, Fed Chair Jerome Powell signalled a more cautious stance for December, though UOB’s economists still expect another 25-basis-point cut by year-end to counter downside risks to growth and employment.
Gold prices slipped on Friday as the US dollar strengthened amid uncertainty over the Federal Reserve’s next move on interest rate cuts, though the metal remained on course for a third consecutive monthly gain.
Spot gold eased 0.4 per cent to $4,005.54 per ounce as of 0459 GMT, but has still risen 3.9 per cent so far this month. US gold futures for December delivery held steady at US$4,018.10 per ounce.
© New Straits Times Press (M) Bhd
