We have revised our gold forecasts lower to reflect elevated oil prices for longer, hawkish Fed repricing and potential softness in India demand.

Christopher Wong
Executive Director,
FX Strategist,
OCBC Group Research,
OCBC

Oil

Prospects for a 60-day US-Iran ceasefire extension and partial reopening of the Strait of Hormuz have improved, although risks remain high after renewed US strikes in southern Iran. Easing tensions have pushed Brent back below US$100/barrel despite earlier gains that still fall short of what the scale of disruption would usually imply. Oil prices are still struggling to break May’s range, while volatility has dropped sharply.

Oil has stayed relatively contained even with limited tanker traffic through Hormuz. Three forces explain this. First, China has sharply cut crude buying, with imports down over 2 million barrel per day (mb/d) in April versus 9.3 mb/d in January-February. Buying probably weakened again in May. When prices rise and supplies are uncertain, China appears to draw on inventories rather than increase imports.

Second, the US has become the marginal supplier. Europe and Asia are pivoting away from disrupted Middle East supply while buying more from the US. The United States’ Strategic Petroleum Reserve releases have also supported the supply response.

Third, inventories were ample at the start of the conflict and continue to be drawn down. This buffer has capped prices for now, but it is finite. The cushion likely spans weeks to a few months, leaving the market exposed if disruptions persist.

A challenging circular dynamic is also in play. Supply shocks have so far struggled to translate into sustained price spikes. Yet a sharper spike may ultimately be needed to force a diplomatic resolution that restores flows through Hormuz. In other words, higher prices may be the catalyst for de-escalation.

Our base case is unchanged despite shifting headlines. Middle East flows should recover after mid-year, allowing prices to ease into the second half of 2026. That said, the downward trajectory will likely be gradual. Infrastructure damage, renewed strategic stockpiling, and a higher structural risk premium should keep prices sticky. Tehran’s ability to disrupt Hormuz remains the key constraint. We expect Brent to end the year near US$80/barrel, with risks skewed to the upside.

Precious Metals

Gold

Gold softened in May as elevated oil prices and Hormuz disruption lifted yields, supported the US Dollar and drove a more hawkish Fed repricing. This has limited gold’s safe-haven appeal, while ETF momentum has also slowed.

Near-term, gold may need a better external backdrop to regain traction — clearer US-Iran de-escalation, lower oil prices, softer yields and a more dovish Fed path. India’s higher import tariffs may also weigh on physical demand at the margin. Still, the medium-term anchor remains intact, supported by central bank diversification, strategic allocation demand and portfolio hedging.

We have revised our gold forecasts lower to reflect elevated oil prices for longer, hawkish Fed repricing and potential softness in India demand.

Silver

Silver has moved into consolidation after earlier gains. The same macro mix of oil-led inflation concerns, higher yields and a firmer US Dollar has capped upside, while India’s import curbs add uncertainty around physical demand.

Medium-term fundamentals remain constructive, led by solar, electronics, grid infrastructure and electrification demand, with mine supply slow to respond. But silver’s industrial exposure also leaves it more vulnerable when growth sentiment weakens.

We expect near-term consolidation until there is clearer direction on US-Iran developments, oil prices and the Fed path.

Currency

US Dollar (USD)
We remain neutral on the USD, expecting a firm but rangebound profile. The Fed is moving away from an easing bias as US growth holds up and inflation stays sticky. This supported a gradual grind higher of the USD over the past few weeks. Fedspeak points to a potential shift toward a neutral stance at new Fed Chairman Kevin Warsh’s first FOMC meeting. Elevated energy prices continue to weigh on global growth, although unevenly. The US stands out, supported by AI-led capex, while growth in Europe and China are softer. A potential US-Iran deal reopening the Strait of Hormuz would be USD-negative via lower oil prices, but downside should be limited by the outperformance of US equities. Our base case projects Middle East oil flows rising after mid-year, with prices easing into 2H2026, albeit gradually. We expect Brent to be near US$80/barrel by year-end, with upside risks.

Pound (GBP)

We shift from bearish to neutral on the GBP and revise our end-2026 EURGBP forecast to 0.87 from 0.89. Politics remains a key focus. A potential win for Andrew Burnham at the 18 June Makerfield by-election could trigger a Labour leadership contest in late August or early September. Burnham is widely seen as a likely successor to Prime Minister Keir Starmer. Despite soft UK data and ongoing political risk, GBP has recovered from its early May losses. Easing fiscal concerns, supported by Burnham’s commitment to discipline, and relatively attractive carry have helped stabilise the currency. Positioning also matters. Elevated GBP shorts could unwind further, especially if oil prices ease, which tends to support risk-sensitive, oil-importing currencies like the GBP.

Renminbi (RMB)
RMB gains held up through May, even during bouts of broader USD strength. Support came from constructive US-China optics, firmer daily fixes and signs of policy tolerance for measured RMB appreciation. We continue to look for gradual RMB gains, but the daily fixing remains key. A persistently stronger fix would signal room for further appreciation, while a wider spot-fix gap may suggest markets are moving ahead of the PBOC’s preferred pace.

Ringgit (MYR)
MYR may stay broadly rangebound, with supportive domestic fundamentals offset by a still-challenging external backdrop. Elevated oil prices keep fiscal/subsidy developments in focus, while political headlines may add a modest risk premium at the margin. Near-term, USD direction, RMB moves and broader risk sentiment should remain the key drivers.

Rupiah (IDR)

IDR remains under pressure despite BI’s larger-than-expected 50bp hike. The move reinforced BI’s focus on Rupiah stability, but support has been diluted by renewed domestic policy uncertainty, including plans for tighter state control over key commodity exports. While this may help revenue collection and FX reserves over time, implementation risks could weigh on investor confidence. Elevated oil prices, geopolitical risks and higher yields in Developed Markets also remain headwinds for oil-importing, high-beta Asian currencies. We are lowering our IDR forecasts to reflect this tougher mix. A durable recovery likely requires clearer domestic policy signals and relief from oil, geopolitics and global yields.

Singapore Dollar (SGD)
SGD should remain relatively supported into the month ahead. Singapore’s stronger final 1Q2026 GDP print suggests growth momentum has held up better than feared, while core inflation pressures may firm gradually amid geopolitical, energy and imported inflation risks. The likelihood of another MAS tightening in July is rising if growth stays supported and core inflation pressures build. Broader USD direction will still matter, but resilient domestic fundamentals and MAS policy bias should help limit USDSGD upside.