OCBC’s FX Strategist Sim Moh Siong reports that Gold has come under pressure after breaking below its 200-day moving average on a more hawkish Fed narrative and oil-led inflation fears. Prices later stabilised as Middle East tensions eased, but EM policy risks and higher yields weigh on safe-haven demand. OCBC trims its end-2026 Gold forecast, yet maintains that structural bullish drivers remain intact and the uptrend is only delayed.

Safe-haven appeal challenged by EM risks

"The break below the 200-day moving average, driven by a more hawkish Fed narrative, triggered accelerated selling in gold. Prices later stabilised after briefly dipping below USD4,300 as oil pared gains amid signs of de-escalation between Iran and Israel."

"Hawkish Fed expectations, partly fuelled by higher oil prices and strong US labour data, have weakened gold’s traditional safe-haven appeal during geopolitical stress. Sentiment also took a hit after India raised import duties on gold and silver to 15% from 6%, effective 13 May 2026, to curb imports."

"Central bank demand should remain resilient. However, risks are emerging that EM central banks may mobilise gold reserves to raise USD liquidity and defend currencies. Following the outbreak of war in the Middle East, Türkiye’s central bank sold or loaned around 130 tonnes, one of the largest recent reserve drawdowns, to stabilise the TRY. EM currency dynamics remain challenged by elevated energy prices, a firmer USD and the risk of a more hawkish Fed."

"Despite these headwinds, structural bullish drivers including currency debasement, fiscal risks and geopolitical fragmentation remain intact. A moderation in energy-driven inflation is needed for these themes to regain traction. We lower our end-2026 gold forecast to USD5,100/oz from USD5,350/oz."

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