Gold’s price correction: What investors need to know

FOLLOWING its surge to a record high of US$4,380 (S$5,707) an ounce in mid-October, gold has since encountered a pullback in price. However, most investment strategists believe that the underlying fundamentals supporting gold’s rapid ascent are firmly in place and that the precious metal should be a strategic component of diversified portfolios given the persistent threats of inflation and geopolitical uncertainty.

To put the recent sharp drop in gold prices in perspective: Gold may have retreated by close to 10 per cent since hitting an all-time high in October 2025, but the precious metal is still up more than 40 per cent so far this year. Gold traded just below US$2,800 an ounce at the end of 2024 compared with around US$2,000 at the end of 2023.

Moomoo Singapore’s chief market strategist Isaac Lim frames gold’s recent weakness as a technical correction rather than a trend reversal.

“The recent pullback on gold is not a cause for alarm. It’s mostly due to profit-taking and an outflow of capital as part of a wider rotation to other asset classes. This is an opportunity for investors looking to scoop gold up at a discount,” he says.

“As long as gold prices hold above the US$3,500 support level, the long-term uptrend remains intact.”

Drivers behind gold’s rally

Gold, the world’s oldest form of wealth, has rekindled its appeal as governments worldwide reassess economic independence and supply-chain security. It has become a modern symbol of mercantilism – the centuries-old philosophy that prized precious metals as a measure of national strength.

Several forces have fuelled gold’s climb: a weakening labour market coupled with persistent inflation that has eroded confidence in cash and stymied consumer spending; and widening government deficits in the US and other Western countries which have shaken faith in sovereign debt.

Geopolitical tensions from Ukraine to the Middle East have also boosted gold’s performance, as have the trade wars launched by the administration of US President Donald Trump. Although the US-China trade conflict has entered a quieter phase, lingering political and economic risks continue to reinforce gold’s role as a safe-haven asset.

In recent years, central banks led by China, Poland and Kazakhstan have bought huge quantities of gold to diversify their reserves and reduce their reliance on the US dollar. Thanks in part to gold’s appreciation, the precious metal now accounts for a larger part of global central bank reserves than US Treasury bonds issued by the US government.

Combined, these forces have sparked both short-term demand and a broader, structural shift in how gold is viewed, echoing the turbulent 1970s, when the US abandoned the gold standard and the precious metal soared from US$35 per ounce to US$850 over the next decade.

The US Federal Reserve is already on an easing cycle and is expected to cut interest rates. This, together with persistent inflation eroding cash’s purchasing power, will sustain strong demand for gold as a long-term store of value.

Changes in the ecosystem

For investors seeking to take advantage of such opportunities, evolving market instruments are making gold increasingly accessible to both investors and traders. This includes innovations in the futures market, such as CME Group’s micro gold contracts – which represent just 10 troy ounces, or one-tenth the size of the standard 100-ounce contract.

Such leveraged instruments allow smaller investors to participate in the futures market and hedge or diversify their portfolios more dynamically amid market swings.

Previously, retail investors could gain exposure to gold only via exchange-traded funds (ETFs) or by holding physical bars. Gold ETFs can be readily purchased on the moomoo app and other trading platforms.

“Gold used to be something only institutions could easily trade. For retail investors, owning gold meant buying physical bars and paying for storage,” Lim notes. “Products like CME’s micro gold futures are changing that, making gold trading far more accessible, liquid and cost-efficient for everyday investors.”

As markets navigate shifting monetary policies, entrenched inflation and evolving investment behaviors, gold’s story is far from over. Short-term corrections may test investor sentiment, but the forces supporting its long-term value remain deeply entrenched.

With both institutional and retail participation broadening through innovative instruments like micro futures, gold continues to stand out not just as a store of value, but as a dynamic asset class – bridging the security of tradition with the opportunities of a modern, evolving market.

Disclaimer: In Singapore, investment products and services available through the moomoo app are offered through Moomoo Financial Singapore Pte. Ltd. regulated by the Monetary Authority of Singapore. Investments in capital market products involve risk. Full disclaimers at www.moomoo.com/sg/support/topic5_510. This advertisement has not been reviewed by the Monetary Authority of Singapore.