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Gold is set to entrench its downward trend back towards the $1800 level as strategists at OCBC Bank think XAU/USD has topped at $1900. As real rates continue to rise, that is likely to pressure the yellow metal lower. Consequently, XAU/USD may reach its terminal steady state price of $1500 by end-2022.  

Gold may have topped at $1900

“The shift downward in both nominal yields (as a result of the soft US labour market) and breakeven yields (due to falling inflation expectations) mean real yields are likely to continue trading within range for now. Our rates strategist expects that US real yields may find a bottom at -1.0% in the near term and slowly rise towards -0.6% by end-2021. This suggests that gold, which typically moves in opposite correlation to real yields, may have found a top at its current level of $1900.”

“We expect gold to end at $1800 by end 2021 as the global vaccination drive gathers pace while the Fed turns increasingly less dovish on its monetary stance, driving real rates higher and in turn pushing gold prices down.”

“Our estimation of gold’s terminal steady state remains at $1500, which we think the precious metal may retrace by the end of 2022.”