Gold prices extended gains on Wednesday, climbing to a two-week high, supported by a modest pullback in the US dollar.
However, the broader outlook for the precious metal remains bearish in the near-term, weighed down by elevated bond yields across major economies.
Rising oil prices, which reached multi-week highs amid escalating tensions in the Middle East, have fuelled concerns over global inflationary pressures and, in turn, reinforced hawkish monetary policy expectations.
Markets currently anticipate two interest rate rises from the Federal Reserve by January. Meanwhile, the Bank of Japan has also indicated a willingness to tighten monetary policy.
Against this backdrop, gold is at risk ahead of central bank decisions. The ECB will set rates this week, followed next week by the Federal Reserve, the Bank of England and the Bank of Japan. Markets will seek clues regarding the monetary policy path ahead in the accompanying communications. A hawkish tone from policymakers could place selling pressure on gold, while a softer stance could provide some relief.
Despite the near-term headwinds, gold continues to draw structural support from sustained central bank purchases, which could help limit downside risks over the longer term and support a recovery once conditions improve globally.
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