Gold is likely to remain range-bound in the near term as investors await the upcoming US Federal Reserve policy decision, although OCBC continues to maintain a constructive medium-term outlook for the precious metal.
The bank said gold rebounded following the latest US consumer price inflation data despite the figures reinforcing expectations that the Fed could raise interest rates this week.
The recovery came as the 10-year US Treasury yield eased from levels near 5%, while oil prices also retreated from earlier highs, helping to alleviate some of the inflation concerns that had weighed on bullion.
Dip-buying and broader investor participation provided additional support to gold prices, OCBC said.
Gold was last trading around US$4,350 an ounce.
OCBC said elevated real yields continue to represent the main near-term obstacle for gold, particularly if the Fed maintains a hawkish policy stance.
However, the bank said several structural factors continue to provide a floor for the precious metal, including stronger investment demand, central bank purchases and concerns over fiscal credibility and diversification away from the US dollar.
OCBC therefore retained its constructive medium-term bias, with the upcoming Federal Open Market Committee meeting seen as the key test for whether gold’s latest recovery can extend or whether higher interest rates and bond yields will reassert downward pressure.
From a technical perspective, OCBC said bearish momentum on the daily chart remains intact, while the Relative Strength Index is broadly flat.
The bank expects sideways trading to persist until a clearer catalyst emerges.
Immediate resistance is seen at US$4,460, corresponding to the 21-day moving average, followed by US$4,540 at the 200-day moving average.
A stronger move higher could bring the recent peak of US$4,700 back into focus.
On the downside, support is located at US$4,270, around the 50-day moving average, followed by the psychological US$4,000 level.
OCBC said the Fed decision will be critical in determining whether investment demand and central bank buying can offset the pressure from elevated real yields in the near term.
