OCBC says gold needs softer oil and a dovish Fed to break out

Gold stayed flat in April as oil surged above $120 a barrel and the Fed’s rate‑cut outlook slipped to mid‑2027, leaving the metal to act more like a macro risk proxy than a safe haven [1]. OCBC’s Christopher Wong says the lack of upside reflects higher real rates and a stronger dollar, both driven by the oil price spike tied to the Iran‑Strait of Hormuz tension [2].

The bank maintains its gold price target but flags a heightened risk of short‑term consolidation, noting that central‑bank buying and reserve diversification still underpin demand [1]. However, Wong points to two clear catalysts for a rebound: a softer oil market and a more dovish Fed stance [2]. The current oil environment remains tight; dated Brent trades far above front‑month ICE Brent, and even though the spread has narrowed from a $35‑per‑barrel peak, it still signals acute scarcity [1]. OCBC forecasts Brent at $100 per barrel through mid‑year, easing to about $80 by year‑end as supply normalises slowly, especially for low‑pressure fields in Iraq and Kuwait [1].

Geopolitical risk from the Hormuz standoff has kept oil prices elevated, reinforcing strategic stockpiling and boosting demand for energy‑linked assets [1]. Yet the same risk premium lifts the dollar and yields, which depresses gold’s appeal. With the Federal Open Market Committee showing a divided, more hawkish tone and pushing the first rate cut to 2027, the dollar’s safe‑haven draw is muted, limiting gold’s upside [2].

If oil prices retreat or the Fed adopts a more accommodative posture, the macro backdrop could shift in gold’s favour. Until then, the metal is likely to hover in a consolidation zone, with any breakout hinging on the resolution of Middle‑East tensions or a policy pivot that eases real‑rate pressure. The open question remains: will oil prices fall enough, and will the Fed’s stance soften, to unleash gold’s next rally?