Gold managed to eke out gains last week and is now trading at its highest month to-date. Based on current levels of Treasury yields and the dollar, strategists at OCBC Bank view XAU/USD as too rich and trading above the upper band of its fair value range.
“The yellow metal is currently supported by a rotation of funds into haven assets, but that is counteracted by the continued rise in Treasury yields and the dollar. If the latter two continue to rise, gold is likely to be pushed back down, especially after the conclusion of quarter-end.”
“Our fair value model for gold sees a trading range for gold at $1610-$1710, which implies gold is currently trading rich above its upper fair value band.”
“We see an opportunity to short gold at current levels and will recommend taking profit at $1660, with a cut-loss threshold at $1780.”
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