Gold: Supported by lower oil prices and yields – ING

ING’s Warren Patterson and Ewa Manthey report that Gold has moved higher on Monday as falling Oil prices ease inflation concerns and weigh on the US Dollar (USD) and Treasury yields. They say Gold should stay supported near current levels if yields remain contained, but warn that any hawkish surprise from the Federal Reserve (Fed) could cap further upside in the near term.

Lower yields and a softer dollar underpin bullion

"Gold prices moved higher on Monday as a sharp decline in oil prices eased inflation concerns and the prospect of further monetary tightening. The move followed a pause in hostilities between the US and Iran."

"Lower oil prices also weighed on the US dollar and Treasury yields, improving the outlook for non-yielding assets ahead of this week's Federal Reserve meeting."

"Markets are now looking to the Fed and upcoming US inflation data for further guidance on the interest-rate outlook."

"Gold should remain supported near current levels if yields stay contained."

"However, any hawkish surprises from the Fed could limit further upside in the near term."