Gold, in a time of global uncertainty, faces fears of a repeat of March's events. Buying pressure remains, but capital flows are becoming more cautious.

Hua Seng Heng warns that gold risks a repeat of March's situation, as geopolitical factors push oil prices and inflation into pressure on the Fed's interest rates. Although short-term investors are slowing their purchases, strong support from central banks worldwide remains. Watch for a crucial support level at $3,800 before anticipating a long-term recovery.

July 16, 2569 – Hua Seng Heng points out that gold prices continue to fluctuate amidst geopolitical uncertainty , particularly tensions between the United States and Iran. This follows market assessments that the 60-day temporary ceasefire agreement has expired, and Iran has once again announced the closure of the Strait of Hormuz. As a result, the risk of confrontation and retaliation between the two sides has become a key concern for investors.

This situation has caused markets to worry about a possible repeat of March, when global gold prices experienced a sharp correction. Despite high geopolitical risks—due to uncertainty surrounding shipping through the Strait of Hormuz—oil prices have driven above $100 per barrel, raising concerns that inflation could accelerate and keep interest rates high longer than the market anticipates.

This picture reflects that gold prices don't always rise in line with war risks, as the market also weighs the impact of oil prices on inflation, interest rates, and the value of the dollar. If oil prices rise to the point of increasing inflationary pressure, the market may assess that the Federal Reserve (Fed) needs to maintain its tight monetary policy, which would be a short-term pressure on gold prices.

Meanwhile, the demand for gold among different investor groups reflects distinctly different trends. Investment flows through Gold ETFs indicate short-term investor caution, while many central banks continue to increase their gold reserves to diversify risk in the long term.

Data from the World Gold Council indicates that in June 2569, global gold ETFs experienced net outflows of $8.9 billion, with exits occurring across all regions, the largest being North America at $5.5 billion. This resulted in a 74-ton decrease in gold holdings, bringing the total to just 4,047 tons, while assets under management (AUM) fell 13% from the previous month to approximately $526,000 billion.

However, the decline in AUM does not mean that all investments have been withdrawn, as AUM fluctuates with capital flows and gold prices. Considering the first half of the year, global Gold ETFs still saw net inflows of approximately US$8 billion and a net increase of 18 tonnes in gold holdings, even though AUM decreased by 6% year-to-date. The World Gold Council attributed this primarily to the decline in gold prices.

This overall picture does not reflect a loss of demand for gold investment through Gold ETFs, but rather shows that the strong buying pressure seen earlier in the year has begun to slow down, with money flows turning negative in May and June.

Outflows from North American funds were pressured by weaker gold prices, the Federal Reserve's more dovish stance, inflation concerns, rising real yields, and a stronger dollar. Meanwhile, most outflows from Asia originated from funds in China amid a stock market recovery and increased demand for riskier assets.

Data from May also showed that global gold ETFs experienced outflows of approximately $2 billion, while technology ETFs saw their highest inflows since the beginning of 2567, reflecting that some investors are beginning to shift their funds back into stocks and riskier assets.

However, the World Gold Council did not specify that the outflow from Gold ETFs was primarily due to profit-taking, but rather a result of a combination of factors including the range of gold prices, the strength of the US dollar and bond yields, expectations regarding interest rate direction, and the recovery in demand for risky assets. Therefore, it should be viewed as a reflection of portfolio adjustments and short-term investor caution, rather than concluding that it is a direct shift of funds into technology stocks.

For the Indian market, the situation is different. Following the government's increase in gold import tax from 6% to 15%, domestic gold prices rose by approximately 4-6% after the measure took effect, prompting some investors to sell and realize profits. At the same time, demand for physical gold remained weak due to seasonal factors, coupled with relatively high supply. Therefore, this is considered a factor specific to the Indian market rather than the primary cause of capital outflows from gold ETFs globally.

Another factor pressuring the investment climate is the fact that several large financial institutions, including Bank of America, JPMorgan, Deutsche Bank, Goldman Sachs, and HSBC, have successively lowered their short-term outlook on gold prices. This reflects caution regarding the price trend and causes investors to delay buying during a period of high volatility.

On the other hand, the latest data covering activity in May indicates that central banks worldwide made net purchases of 41 tons of gold. Poland added 18 tons, bringing its year-to-date cumulative purchases to 64 tons and its total gold reserves to 614 tons. Meanwhile, China purchased an additional 10 tons, marking its 20th consecutive month of net purchases, bringing its year-to-date cumulative purchases to 25 tons and its official gold reserves to approximately 2,331 tons.

Furthermore, Uzbekistan, Kazakhstan, and Singapore were net buyers, while Russia and Turkey were net sellers in the same month, reflecting the differing approaches to managing each country's gold reserves based on their own policies and objectives.

Hua Seng Heng assesses that investment flows through Gold ETFs and central bank gold purchases are driven by different factors. Investments through ETFs are sensitive to short-term factors such as gold prices, real yield interest rates, the US dollar, and demand for risky assets. Meanwhile, central banks tend to increase their gold holdings for long-term reserve management and diversification purposes. This difference reflects that, even though short-term buying pressure has slowed, the structural demand for gold has not disappeared, especially from the central bank sector, which remains a key supporter of gold prices in the medium to long term.

Hua Seng Heng analyzes that gold prices are likely to attempt to establish a base within the range of $3,800-$4,260 per ounce in the next 1-2 months. The $ 3,800 per ounce level is a key support level, representing approximately 61,000 baht per baht of gold in Thai currency. If the price falls below this level, there is a possibility of a decline to test the $3,600 per ounce level, or approximately 59,000 baht per baht of gold, before a gradual recovery is possible in September.

The key resistance level is around $4,500 per ounce, near the 200-day moving average, or approximately 68,000 Thai baht per baht weight. If the price can firmly hold above this level, it will confirm that the long-term trend is beginning to reverse and become upward again. However, Hua Seng Heng still estimates its year-end gold price target at $4,900-5,000 per ounce, or approximately 72,000-73,000 Thai baht per baht weight.

Going forward, investors should closely monitor developments in the US-Iran situation, oil price trends, inflation outlook, the Federal Reserve's stance, as well as investment flows into gold ETFs and central bank gold purchases. These factors will determine whether the short-term slowdown in buying pressure develops into sustained downward pressure or is merely a consolidation phase before gold regains support.

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