Gold: Relentless rise – OCBC

Gold hit another record high of close to $4,380 this morning amid concerns of US regional banks’ creditworthiness while ongoing US-China tensions continued to fuel safe-haven demand, OCBC's FX analysts Frances Cheung and Christopher Wong note.

Medium-term view stays constructive

"The dip in UST yields further added to momentum as Fed officials, including Waller, Miran signalled their intent for Oct cut. We reiterate that this run-up in precious metal complex, including Gold, silver reflects a mix of structural, fundamental and sentiment driven demand. The break of $4,000 in Gold has also triggered momentum buying, especially with headlines focused on Gold to $10,000 and discussion and hype on 'debasement trades'.

"But it is also important to acknowledge that Gold’s surge to record highs of over $4,300 and in record pace (up >15% MTD and over 30% since mid-Aug) may have stretched short-term valuations and risk-reward. Sentiment and speculative positioning are starting to look elevated, and there is a risk that Gold may potentially be vulnerable to consolidation if geopolitical tensions stabilize or yields rebound. That said, our medium-term view stays constructive."

"Nominal rates are likely to trend lower as the Fed eases, while central-bank and institutional demand remain solid. The diversification or hedge argument for Gold — against geopolitical, fiscal, and currency risks — also stays intact. XAU last seen at 4338 levels. Momentum remains bullish though RSI is in overbought conditions. Support at 4210, 4060 levels. Resistance at 4496."