Gold: Recovery hinges on lower yields – OCBC

OCBC’s Christopher Wong notes that Gold’s brief post-payrolls rebound faded as long-end US yields stayed elevated and the Dollar remained firm. The bank argues that reduced Fed hike risk alone is insufficient for a sustained rally; a clearer, lasting decline in long-end and real yields, alongside some easing in Oil-driven inflation concerns, is needed for a firmer Gold recovery.

Still vulnerable while yields stay high

"Still waiting for yields to turn. Gold’s post-US payrolls rebound faded quickly despite a softer US labour report and a further pullback in October Fed hike expectations. The key issue is that long-end yields did not fall sustainably and the USD stayed firm, limiting follow-through in gold."

"This reinforces the view that lower Fed hike risk alone may not be enough to drive the next leg higher. The more important catalyst is whether softer US data can pull long-end and real yields lower on a more sustained basis. Elevated oil prices remain a complication by keeping inflation and term premium concerns alive."

"Near term, gold may remain vulnerable to consolidation if yields stay high, while a clearer decline in yields and the USD would provide a firmer basis for recovery."

"Mild bearish momentum on daily chart intact while RSI fell slightly. We continue to watch price action - compression of moving averages typically precedes a breakout trade. And there are some risk of gold trying the downside in the short term. Support at 4110, 4030 and 3944 (previous low). Gold needs to reclaim back above 4280 – 4330 (21, 50, 100 DMAs) to see bearish forces negate. Resistance at 4300/50, 4460 levels."

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