Gold: Breakout extends as yields ease – OCBC

OCBC analysts Christopher Wong and Sim Moh Siong note a significant surge in gold as Middle East tensions decrease, affecting oil prices and US Treasury yields, which in turn weaken the US dollar. Technical buying and short covering intensified once the price broke past resistance. Central bank demand from the Bank of Korea further bolstered the precious metal.

Gold exhibited strong momentum overnight as oil prices fell and US Treasury yields and the US dollar softened. Market forecasts for a Fed rate hike in September have become less likely. The probability of a gold price increase is now estimated at 55%, down from 66% a week prior. The sharp rise in gold's price suggests investors are anticipating a resolution to the US-Iran conflict, potential normalization of oil flows through the Strait of Hormuz, lower real interest rates, and a lessening US dollar.

The Bank of Korea's planned purchase of domestically produced gold for the first time in 13 years and recent involvement in gold ETFs may have also bolstered investor sentiment, although the size and timing of these purchases are uncertain. Near-term momentum has improved, with Friday's key US employment figures potentially determining whether the decline in yields, the US dollar, and gold's breakout can be sustained.

Daily momentum is mildly bullish, with the Relative Strength Index nearing overbought conditions. Key resistance levels are at 4333 and 4393, while support levels are at 4160 and 4077. The article was generated with AI assistance and reviewed by an editor.