Gold faces risks in both directions near recent lows – OCBC

Easing Oil prices have provided some relief, but OCBC’s Sim Moh Siong and Christopher Wong regard Gold’s recovery as tentative as broader deleveraging continues to weigh on prices. Although cleaner positioning and resilient ETF holdings leave room for a recovery, elevated downside hedging points to defensive sentiment. Against a backdrop of stretched downside momentum, they identify key technical levels and stress that higher resistance must be reclaimed to restore confidence.

Rebound remains tentative as risks run both ways

"Gold regained some ground as the pullback in oil prices eased inflation concerns, although the rebound remains tentative."

"As highlighted in our latest Precious Metals Tracker: Searching for a Floor (26 Oct), gold’s failure to benefit from lower Treasury yields last week suggests that broader deleveraging and position adjustments continue to weigh on prices."

"While speculative positioning has become less stretched and ETF holdings remain resilient, increased demand for downside protection suggests sentiment remains defensive."

"Focus now shifts to the FOMC (2am SGT), where a hold is widely expected, but the extent to which policymakers leave the door open for further tightening will matter. Thursday’s core PCE will provide another test of the inflation outlook, while big-tech earnings could influence broader risk sentiment and liquidation pressures. "

"Beyond this week, our historical study suggests gold has often traded firmer in the months following US midterm elections, although the wide range of outcomes offers little assurance of a sustained rally."

"The post-election policy mix and its implications for yields and USD will matter more. For now, cleaner positioning leaves room for a sharper recovery if macro conditions improve, but further consolidation cannot be ruled out until selling pressure shows clearer signs of abating."

"Mild bearish momentum on daily chart intact but RSI is approaching oversold conditions, suggesting downside momentum is becoming stretched. But there are few signs of a sustained reversal for now. Key support at 3940/60 levels (Jun/Jul low). Beyond that puts 3810, 3600 levels in focus. Resistance at 4080, 4130 (21 DMA). Gold needs to reclaim 4280/90 levels (50% fibo retracement of Apr 2025 low to 2026 high, 50 DMA) to restore confidence."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)