Gold: A cautious view of near-term prospects – OCBC

Gold remains under pressure even as US Treasury yields decline and geopolitical risks intensify, according to OCBC strategists Christopher Wong and Sim Moh Siong. In their assessment, surging oil prices are rekindling inflation worries and expectations that restrictive Fed policy will persist, putting pressure on gold. Their near-term stance remains cautious: for gold to regain momentum, they say oil prices need to ease, real yields need to fall and the metal needs to show a better price response.

Why is the safe haven struggling as yields fall?

"Gold came under renewed selling pressure overnight, falling more than 2.5%. Brent’s sharp rise amid renewed Middle East supply concerns added to inflation worries and expectations that the Fed may need to keep rates restrictive for longer. What was notable was that gold continued to weaken even as US Treasury yields fell sharply amid the global tech selloff."

"Neither lower yields nor heightened geopolitical uncertainty has been sufficient to support gold, suggesting that near-term sentiment remains fragile."

"We remained cautious in the near term, particularly as gold has struggled to respond positively to the recent decline in yields."

"An easing in oil prices and further decline in real yields could help gold stabilise, but we would want to see a better price response before turning more constructive in the near-term."

"Support at 4000, 3943 levels (recent low). Resistance at 4080, 4156 (21 DMA)."

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