Gold: Recovery hinges on real yields – OCBC

OCBC’s FX Strategists Sim Moh Siong and Christopher Wong note Gold has rebounded over 1% as US Treasury yields, USD and Brent eased, while the Federal Reserve appears in no rush to tighten further. They remain cautiously constructive, stressing that sustained relief in real yields and avoidance of renewed yield increases are key for Gold’s consolidation and recovery prospects in coming weeks.

Cautious constructive Gold stance

"Gold rebounded as US Treasury yields, the USD and Brent eased despite firm US data. We remain cautiously constructive, with further recovery dependent on sustained relief in real yields."

"Gold rebounded over 1% overnight, recovering from three consecutive sessions of losses as US Treasury yields and the USD retreated. Brent also eased, offering some relief to the inflation/rates backdrop. Fed officials also appeared in no hurry to tighten policy further, helping to temper expectations for an October hike."

"We remain cautiously constructive, particularly if the pullback in long-end yields and the USD extends. The latest move is another reminder that gold is trading the bond market’s reaction to US data rather than the data itself. "

"That said, underlying inflation pressures remain elevated, and the recent decline in yields has been partly driven by risk aversion rather than improving inflation fundamentals. "

"Daily momentum is not showing a clear bias while recent rise in RSI moderated. 2-way consolidation likely for now. Support at 4100, 4060 levels (recent low). Resistance at 4200 (21 DMA), 4240 (100 DMA) and 4330 (50 DMA)."

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