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Gold Price Soars to New Heights: What the Surge Means for Malaysia’s Economy and Jewelry Industry

March 23, 2025
Smart Money

Gold Prices Skyrocket Amid Global Economic Uncertainty: What It Means for Malaysia

KUALA LUMPUR – Gold prices are experiencing unprecedented growth, reaching new heights as investors turn to the precious metal for security amid global economic instability. As of March 20, 2025, gold has breached the US$3,000 mark, standing at approximately US$3,036.74 (RM13,425) per troy ounce. This surge follows a record-setting price of US$2,787.61 (RM12,323) per troy ounce on October 30, 2024, and a recent settling price of US$2,693.23 (RM11,906) in January 2025. ### Uncertainty Fuels Gold Prices

Dr. Mohd Afzanizam Abdul Rashid, chief economist at Bank Muamalat Malaysia Bhd, attributes the soaring gold prices to heightened uncertainty in the global economy. Historical trends indicate that gold tends to perform well during times of economic fear, serving not just as a store of wealth but also as a hedge against inflation, currency devaluation, and geopolitical conflicts.

“Whenever fear grips the global economy, gold shines the brightest," Dr. Afzanizam stated in an interview with Bernama. He highlighted that central banks worldwide are significantly increasing their gold reserves, from just 1.8% of total demand in 2010 to a remarkable 21.0% in 2024. This rapid accumulation has occurred at a staggering 20.2% annual growth rate, compounding upward pressure on gold prices.

Moreover, the Global Economic Policy Uncertainty Index soared to 339.36 points in November 2024, reflecting widespread concerns over U.S. Federal Reserve policies, trade tensions, and political instability during Donald Trump’s second term. Dr. Afzanizam noted, “Historically, whenever economic uncertainty spikes, gold prices follow suit.”

Performance of Other Commodities

While gold captures the spotlight, other commodities are also experiencing notable price movements but are lagging behind gold’s meteoric rise. Cocoa prices reached a 50-year high in December 2024, driven by adverse weather and underinvestment in major producing regions, though they have seen a decline since then. As of March 2025, cocoa prices were approximately US$7,746.3 (RM34,245) per tonne.

Brent crude oil displayed volatility, inching up to US$71.78 (RM317) per barrel on March 20, 2025, primarily due to ongoing instability in the Middle East and economic stimulus measures in China. Despite these fluctuations, oil prices have not mirrored the exceptional uptrend seen in gold.

Coffee prices have also been volatile, reflecting shifts in global supply chains and consumer demand, while palm oil, significant for Malaysia, has faced price adjustments due to changing global supply and demand scenarios.

Impact on Malaysian Consumers and the Jewelry Industry

For Malaysia, the current gold rush brings a mix of benefits and challenges. As gold jewelry remains a cultural and economic staple, particularly for women and within Islamic finance contexts like Ar-Rahnu (Islamic pawn broking), its rising prices present both opportunities and barriers. Dr. Afzanizam commented, “The popularity of gold-based investments is encouraging Malaysians to diversify their portfolios.” However, soaring prices may lead consumers to seek alternative investments or lower-cost jewelry options.

The increasing prices are compelling retailers to adapt. While some jewelers are thriving, others struggle to maintain sales as consumers become more cautious. Kuala Pilah, Negeri Sembilan has emerged as a competitive gold shopping destination due to attractive pricing.

The dilemma facing individuals already invested in gold is whether to cash out or hold for potential future gains. “It depends on your financial goals,” Dr. Afzanizam advises, indicating that timing is crucial for short-term traders.

Mixed Impact on the Jewelry Sector

Datuk Wira Louis Ng, president of the Malaysia Gold Association, noted a mixed landscape for the country’s jewelry industry. While domestic consumers adopt a more cautious stance towards buying gold jewelry during traditional peak seasons, the export sector has substantially benefited from the price surge, with an estimated RM7.7 billion in gold jewelry exports reported for 2024. To adjust to changing consumer preferences, jewelers are offering lighter designs requiring less gold, making pieces more affordable while integrating alternative materials like lab-grown diamonds to cater to cost-conscious buyers. The shift towards minimalist jewelry designs using sterling silver and gold-plated options also reflects the evolving market landscape.

Future Outlook: Will Gold Hit US$5,000?

Speculations regarding future gold prices vary, with some predicting a rise to US$5,000 (RM22,104) per troy ounce by year-end. However, Dr. Afzanizam remains cautious, suggesting a more realistic price range of US$3,000 to US$3,500 over the next few years. “It is hard to predict gold prices as they tend to break their all-time high records multiple times,” he explained.

As the jewelry industry continues to adapt to the fluctuating market, innovations and diversification strategies will be essential. Industry representatives are focusing on new offerings, including smaller investment gold bars to accommodate a wider range of consumers and fostering a growing awareness of gold’s role in wealth preservation.

In summary, while gold prices soar and present notable investment opportunities, the impact on Malaysian consumers and the jewelry industry remains complex and multifaceted, with both challenges and avenues for growth.