Gold: Rebound needs softer Oil and data – OCBC

OCBC’s Sim Moh Siong and Christopher Wong report that Gold has rebounded from sub-4000 levels after softer United States (US) Consumer Price Index (CPI) prompted markets to pare Fed hike expectations and pushed USD and front-end US Treasury yields lower. They see the move as a reversal of excessive hawkish repricing rather than a macro regime shift, with further upside contingent on easing Oil prices and continued softness in US data.

Soft CPI lifts prices but constraints remain

"Gold rebounded from sub-4000 levels. Softer-than-expected US CPI was the trigger as markets pared back Fed hike expectations while Fed Chair Warsh did not out-hawk earlier rhetoric. USD weakened and front-end US Treasury yields initially moved lower, helping gold recover from a two-week low to an intra-session high of 4102."

"This provides gold with some near-term breathing room, particularly if the USD and yields remain capped. But the move looks more like a reversal of excessive hawkish repricing than a decisive change in the macro backdrop. The June CPI report also predates the latest rise in oil prices, which could keep the inflation outlook and Fed policy expectations volatile."

"Further upside in gold would require oil prices to ease off further and continued softness in US data, with PPI the next test (tonight). "

"Gold last seen at 4051 levels. Mild bullish momentum on daily chart stays intact for now while RSI rose. 2-way trades likely. Resistance at 4113 (21 DMA). Support at 3940/60 levels (recent low in June)."

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