Key insights
- Gold prices rebounded slightly due to dip-buying, but gains are limited by reduced expectations of Fed rate cuts and rising Treasury yields. OCBC analysts suggest the recovery is technical, with key resistance levels to watch. Elevated energy prices and geopolitical tensions in the Middle East could further pressure gold by fueling inflation and supporting higher rates, creating a bearish environment for the non-yielding asset.
Investing.com - Gold prices rose on Monday, fueled by a bout of bargain-hunting as investors assessed bullion prices that were on pace for the biggest monthly drop in almost twenty years.
Spot gold gained 0.9% to $4,533.10 an ounce by 06:36 ET (10:36 GMT), while gold futures advanced 0.8% to $4,561.72/oz. Spot gold had fallen as low as $4,000/oz last week before rebounding back to near $4,500/oz by Friday, although it has fallen by more than 14% over the past one-month period.
Among other precious metals, spot silver gained 1.4% to $70.76/oz, while spot platinum rose 2.7% to $1,916.60/oz.
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OCBC analysts said gold’s rebound from last week’s lows appeared to be largely technical, especially with prices down sharply since start of the Iran conflict in late February. They noted that bearish momentum appeared to be showing some signs of easing, with gold’s relative strength index recovering from oversold territory.
But they warned that it was uncertain whether gold’s recovery could be maintained, noting key resistance levels for spot gold at $4,624/oz, $4,670/oz, and $4,850/oz.
“A more durable recovery would likely require prices to reclaim and hold above these levels. Failing which, gold may continue to trade on a softer footing,” OCBC analysts said.
They added that elevated energy prices risked igniting inflation pressures, in turn driving up Treasury yields and “creating a more challenging environment for gold in the interim.”
Bets that central banks will cut interest rates this year have waned, while wagers on possible hikes have grown, further denting gold’s appeal. The non-yielding yellow metal tends to perform worse in higher rate environments.
Markets remained wary of a potential escalation in the Iran war after the Yemen-based, Iran-backed Houthi group attacked Israel over the weekend. The Houthis could open up a new front in the war, given that they have the capacity to launch strikes in the Red Sea.
Iran said it was prepared for a ground invasion by the U.S., especially after reports late last week showed Washington mobilizing thousands of troops to the Middle East.
President Donald Trump told reporters that negotiations with Iran were going well and that a deal could be close. But he did not specify a clear timeline, while also warning of more attacks against Tehran.
Trump had last week extended a deadline for attacks on Iran’s energy infrastructure to early-April.
Iran has largely rejected the notion of direct talks with the U.S. since the onset of the war in late-February.
(Ambar Warrick contributed reporting.)