Gold: Oil-led inflation fears cap recovery – ING

ING’s Warren Patterson and Ewa Manthey report that Gold has come under pressure as higher Oil prices stoke inflation concerns and push yields and the US Dollar higher. They note that safe-haven demand has been limited despite geopolitical risks, with recent gains driven mainly by dip-buying and short covering. The analysts see $4,000/oz as a key near-term support level.

Higher yields and Dollar weigh on bullion

"Gold fell as escalating tensions in the Middle East pushed energy prices higher, raising concerns that inflation could remain elevated and keep monetary policy restrictive for longer."

"Despite ongoing geopolitical risks, gold has struggled to attract meaningful safe-haven demand since the conflict began. Instead, markets have focused on the inflationary implications of higher oil prices and the prospect of higher-for-longer interest rates."

"Brent crude climbed back above $100/bbl, lifting Treasury yields and the US dollar and weighing on non-yielding assets like gold. Recent strength in bullion appears driven largely by dip-buying and short covering."

"This follows the sharp correction from record highs earlier this year. The rebound has since lost momentum."

"Gold is hovering around the key $4,000/oz support level. However, elevated oil prices and rising yields are likely to cap any recovery, leaving $4,000/oz as the key near-term level to watch."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)