BCA Warning: If Asian demand reverses, gold prices may face a correction

Investing.com - If the momentum-driven buying in Asia reverses, gold could face a significant price correction, according to the latest analysis from BCA Research.

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The company’s chief commodity strategist, Roukaya Ibrahim, stated that recent inflows into gold exchange-traded funds (ETFs) have been primarily concentrated in China and Asia, making the market more susceptible to regional sentiment shifts.

BCA Research noted, “Over the past few months, investment demand from China/Asia for gold ETFs has become a key driver of gold prices.”

However, the firm warned that these investors are “very focused on momentum and price sensitivity,” meaning even small adjustments could trigger selling and accelerate declines.

The company indicated that this reversal of capital flows “could trigger investor liquidations and lead to a notable short-term price correction.”

Despite tactical risks, BCA Research emphasizes that the overall environment remains favorable. The firm states that even if short-term volatility increases, global investment demand could support higher prices within a cyclical framework.

Central bank purchases are expected to provide further cushioning. Emerging market reserve managers continue to diversify into gold, and BCA Research notes they “will accumulate gold during price corrections.”

This behavior should “support gold prices and prevent any corrections from turning into prolonged bear markets.”

Overall, BCA’s view is that while the likelihood of short-term corrections is increasing, the structural drivers for gold remain intact and could sustain an upward trend over time.

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