Gold: Recovery gathers momentum amid cautious optimism – OCBC

Gold’s return above $4,000 after the US midterm elections has encouraged cautious optimism that the metal may be regaining its footing, according to OCBC strategists Sim Moh Siong and Christopher Wong. A weaker US Dollar (USD), lower Treasury yields and softer Oil prices have supported the rebound, with Gold now responding more favourably to the supportive macroeconomic backdrop. For the gains to persist, however, expectations of Fed tightening would likely need to ease and investment demand would need to continue recovering.

Is a softer Dollar helping Gold regain its footing?

"Precious metals rebounded sharply following the US midterm elections, supported by a softer USD, lower US Treasury yields and oil prices as markets reassessed the implications of political gridlock for US fiscal policy and growth."

"Gold rallied around 3%, reclaiming the 4000 level. Expectations that political gridlock may constrain fiscal expansion and weigh on US growth provided some relief to yields, while slippage in oil prices also lent support."

"Encouragingly, gold has started to respond more positively to a favourable macro backdrop, following its earlier reluctance to benefit from lower yields and USD weakness."

"We are cautiously optimistic that gold may be finding its footing, although further gains would likely require some moderation in Fed tightening expectations and continued recovery in investment demand."

"Mild bearish momentum on daily chart faded while RSI rose. Some upside risks not ruled out."

"We continue to monitor real yields, USD direction, oil prices and ETF flows for signs of sustained buying interest. Friday’s US payrolls will be another important test."

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