BCA warns gold vulnerable to pullback if Asian demand reverses

Investing.com -- Gold could face a meaningful price pullback if momentum-driven buying from Asia reverses, according to new analysis from BCA Research.

The firm’s chief commodity strategist, Roukaya Ibrahim, said recent investment flows into gold exchange-traded funds have been heavily concentrated in China and across Asia, making the market more exposed to shifts in regional sentiment.

BCA Research noted that “investment demand for gold ETFs from China/Asia has emerged as a critical driver of gold prices over the past few months.”

However, it warned that these investors are “very momentum-driven and price sensitive,” meaning that even a modest correction could prompt selling and accelerate declines.

A reversal of those inflows “could trigger an unwinding of their positions and produce a meaningful price drawdown in the near term,” the firm said.

Despite the tactical risks, BCA Research emphasised that the broader backdrop remains supportive. It said that global investment demand is likely to underpin higher prices over a cyclical horizon, even if short-term volatility intensifies.

Central bank buying is expected to provide a further buffer. Emerging market reserve managers continue to diversify into gold, and BCA Research said they “will be accumulating the yellow metal on corrections.”

That behaviour should “provide a floor beneath gold prices, preventing any correction from morphing into an extended bear market.”

Overall, BCA’s view is that while a near-term pullback is increasingly possible, the structural drivers for gold remain intact and are likely to extend the rally over time.

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