According to OCBC strategists Sim Moh Siong and Christopher Wong, gold prices have remained sluggish despite a sharp pullback in expectations for an October Federal Reserve rate hike [1]. The strategists note that long-end US Treasury yields have resumed their rise, and the US Dollar remains firm, both of which are contributing to gold's lackluster performance [1]. Additionally, elevated oil prices and a further increase in the ISM prices index are keeping inflation concerns alive, which has not translated into support for gold [1].
OCBC argues that the reduced risk of a Fed rate hike alone is insufficient to drive a sustained recovery in gold prices. Instead, they emphasize that a more durable decline in real yields and the US Dollar would be necessary for gold to turn higher [1]. The strategists caution that until such catalysts emerge, gold may remain vulnerable to further consolidation, especially if upcoming US economic data continues to indicate persistent inflation despite softer labor-market conditions [1].
Technically, gold was last quoted at 4140 levels, with mild bearish momentum observed on the daily chart and a flat RSI, suggesting ongoing price compression that could precede a breakout trade [1].
CONCLUSION
Gold remains under pressure as elevated yields and a firm US Dollar offset the impact of reduced Fed hike expectations. OCBC strategists highlight that a sustained recovery in gold is unlikely without a significant decline in real yields and the Dollar. Market participants should monitor upcoming US data for further direction.