UOB(US:UOVEY) Zhong Guo Jin Rong Xin Xi Wang·2025-10-31 12:49Core Viewpoint - The recent sharp decline in spot gold prices is viewed as a necessary correction to alleviate excessive speculative long positions accumulated over the past three months, despite the strong long-term fundamentals supporting gold prices [1][2]. Short-term Correction: Digesting Excessive Speculation - Spot gold prices fell from nearly $4,400 per ounce on October 20 to below $3,900 per ounce by October 28, a drop of approximately $500 in just over a week [2]. - The market strategy head at UOB, Heng Koon How, noted that this correction appears more moderate following a three-month "parabolic" surge in gold prices [2]. - The report indicates that the correction is necessary to reduce excessive speculative long positions, with Comex gold futures net non-commercial positions nearing historical highs in early October [2]. Long-term Fundamentals: Still Strong - UOB maintains that the long-term fundamentals supporting gold prices remain robust, citing ongoing stable allocations by central banks and strong purchases by investors through various channels such as physical gold bars, futures, and ETFs [3]. - Global gold ETF holdings have risen to nearly 100 million ounces, valued at approximately $400 billion, with further upside potential [3]. - Notably, despite the recent price correction, gold warehouse inventories on the Shanghai Futures Exchange have increased from under 20 tons in early July to nearly 90 tons [3]. Institutional Validation and Latest Forecasts - UOB's views are corroborated by the World Gold Council (WGC), which reported a record global gold demand of 1,313 tons in the third quarter of 2025 [4]. - The WGC highlighted that investors continue to dominate the market, with central banks net purchasing 220 tons of gold in the third quarter, reinforcing demand [4]. - UOB has slightly raised its gold price forecasts by $100 per ounce for the next four quarters, projecting prices to reach $4,000 per ounce in Q4 2025, $4,100 in Q1 2026, $4,200 in Q2 2026, and $4,300 in Q3 2026 [4]. - The report notes potential volatility risks due to uncertainties in Federal Reserve monetary policy, but technical analysis suggests solid support at the $3,751 level [4]. - Looking further ahead, if diversification demand for safe-haven assets continues, gold prices could potentially reach $5,000 per ounce [4].