Gold Is A Safe Haven Asset

Central banks are notable gold holders, adding 1,136 tonnes worth $70 billion to reserves in 2022. This purchase was the highest since records began, with emerging economies, including China, India, and Turkey, increasing their gold reserves.

Gold’s value varies inversely with the US Dollar and US Treasuries and is affected by geopolitical instability and interest rates. A strong USD usually limits gold prices, while a weaker USD boosts them.

Price action in Malaysia reflects broader global pressures, albeit filtered locally through daily adjustments based on exchange rate fluctuations with the US Dollar. The move from 443.92 to 444.46 MYR per gram might seem incremental, but put into context, it aligns with a modest softening in the US Dollar late last week, offering upward tailwinds to gold valuations in local currency terms.

What Matters Underneath Price Changes

What matters here is what lies underneath these changes—the underlying sentiment and positioning shifts that impact not only spot prices but also flows in metals futures and related options markets. The bump in local prices correlates with no abrupt change in demand in the Malaysian market itself; instead, it points to macro shifts, especially as foreign exchange and Treasury yields adjust.

We’ve seen gold maintain its appeal across many different periods because of its historical role—not just as a commodity but also as a financial fallback. Particularly when long-term inflation expectations begin to rise or fiat currencies lose purchasing power, metal demand strengthens. Right now, ongoing buying by central banks continues to offer a layer of price support that shouldn’t be overlooked by participants focused on volatility and directional hedges.

The scale of official-sector purchases in 2022—over 1,100 tonnes—was not ordinary behaviour. That volume, especially from countries adjusting reserve compositions away from USD-heavy baskets, was a clear signal. For short- to medium-dated contracts, that sort of activity creates a floor, a support range which may not always offer upside, but does limit aggressive downside exposure. We’re seeing something of a repeat pattern now, although weekly disclosures are fragmented.

What matters to us, especially over the next few weeks, is the inverse link to US Dollar strength. The latest data from US economic figures is not lining up neatly—mixed inflation prints, stubborn employment numbers, and muted Treasury bids all quietly favour an easing narrative. That puts pressure on the USD and, by extension, injects mild support into gold without a need for any geopolitical trigger.

Short-dated implied vols in gold remain subdued, which might imply complacency or reflect a stabilisation period as traders wait for clearer signals from the next set of central bank meetings. However, open interest in longer-dated call spreads is climbing—slowly, but there. We’ve found that to be consistent with expectations for 2025 rate paths shifting downward, likely pulling terminal rate estimates lower.

For now, the opportunity is appearing in curve steepness, especially where spread premiums between spot and 3-month forwards have narrowed. That hints at compressed carry costs, which often precede expansions in directional trades. Not a moment to ignore coverage gaps, especially when net length among managed money starts ticking up without volume confirmation.

As positioning shows early signs of leaning heavier into beta exposure again, we’d be cautious about overloading leverage at current vols. Instead, a laddered strategy, using calendar spreads or staggered call ratios, acts as a scalable approach now that the macro drivers—like real yields and policy clarity—are still unconfirmed.

In the shorter term, attention turns toward US CPI prints and upcoming Federal Reserve commentary. Both have an outsized impact on gold-denominated contracts when dovish surprises trigger a recalibration of front-end rates, which in turn move the needle on gold through the USD path. There’s no need to overreact, but there is an opportunity in staging into positions mode-on rather than scaling all at once.

Timing, in these circumstances, requires less prediction and more flexibility. With liquidity returning after summer lulls and position books gradually refilling, the next directional move may not come with fireworks—but it pays to be prepared ahead of volume spikes, not after.

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