Gold prices face turbulence as oil, Fed risks increase

Renewed hostility between the US and Iran could cause global gold prices to plunge to US$3,600-3,800 an ounce, or 60,000 baht per baht-weight for domestic gold bar, especially if oil prices rise to $90-100 a barrel and remain at that level for more than a month, according to Thailand's leading gold trader MTS Gold.

Kritcharat Hirunyasiri, chairman of MTS Gold, said the metal faces downside risks for 1-2 months from oil-driven inflation and potential tightening by the US Federal Reserve.

"The biggest risk to gold prices is a sustained rise in oil prices," he said. "If crude oil climbs above $90-100 per barrel and remains elevated, inflation could accelerate again in the US, potentially prompting the Fed to keep interest rates higher for longer or even raise rates further."

Year-to-date, bullion has lost more than 6.8% to stand at $4,030 an ounce, though it has recovered from a low of $3,950 earlier in the year. The non-yielding precious metal, which is used as a hedge against inflation, reached an all-time high of $5,602.22 an ounce on Jan 28 this year.

The market anticipates the Fed could lift its policy rates at its September meeting.

"Once US rates are cut, gold prices will likely fall to $3,800 an ounce or even $3,600 as a bottom," noted Mr Kritcharat.

Mr Kritcharat, second left, accompanies Nuttapong Hirunyasiri, chief executive of Mae Thong Suk Central, left, and Kubix executives to launch the MTS Gold Investment Token.

Despite near-term risks, the medium- and long-term outlook for gold remains positive, he said, citing analysts' forecasts for gold to finish the year in a range of $4,500-5,000 per ounce. These forecasts were downgraded from earlier year-end projections exceeding $5,000.

Looking ahead to next year and beyond, gold is expected to benefit from continued purchases by central banks and the de-dollarisation trend. If prices hold at the $4,000 level over the coming months, analysts believe gold could eventually climb to $6,000-8,000 per ounce over the longer term.

Meanwhile, MTS is unveiling Thailand's first investment digital token that provides investors with exposure to the gold bullion trading business.

The token offers a three-year investment term with a fixed return of 3% per year, along with the opportunity to earn additional returns linked to the appreciation of gold prices at the end of the project.

The tokens are offered at 1,000 baht per unit, with a minimum subscription of 10 tokens or 10,000 baht.

With a total offering size of up to 2 billion baht, proceeds from the initial coin offering are allocated to expand MTS's 74-year-old business, increasing the number of outlets to 20-25 from 13 at present.

Subscriptions are available from July 24 to Aug 31 through the Kubix and Orbix Trade applications, as well as participating securities firms.