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Oliver Nugent, Commodities Strategist at ING argued that despite last week’s drop, gold still remains exposed to upside risks, as the three main fundamental drivers continue to remain supportive.

Key Quotes:

The “fundamental case for holding” the yellow metal remains intact.

“We look to physical demand, geopolitics, and inflation to provide support.”

“Things shouldn’t get much worse, but it will take time before we see improvement.”

“We expect longer-term holders/consumers to build a floor for the yellow metal even if it remains shunned by active money managers hunting for more attractive near-term returns.”

“We look to the flattening yield curve and burgeoning twin trade deficits against the looming catalyst of mid-year elections or nearer term trade spats that could highlight the US policy/political uncertainties and spell a reversal for the greenback.”

“As the dollar eases, it will be game back on for our bullish gold view, given our expectations for inflation to pick up substantially this year.”