We have raised our 12-month gold forecast to US$3,900/ounce from US$3,400/ounce. Tariff-driven recession and stagflation risks are forecasted to continue driving gold prices higher after a period of consolidation.

Vasu Menon
Managing Director
Global Wealth Management
OCBC Bank

Oil

We lower our 12-month Brent forecast to US$65/barrel. Frontloading activity ahead of tariffs explains some of the resilience in China’s oil demand. But oil demand is set to weaken amid an expected payback from the front-loading, leading to slowing global growth.

If trade uncertainty drives a sharper slowdown in broader activity and OPEC+ powers ahead with its aggressive planned supply hikes, Brent could test US$60/barrel or below. Iran-US nuclear talks could also weigh on oil prices. The market is closely monitoring these developments for any hint that a US-Iran agreement could lead to sanctions on Iranian oil being eased, potentially increasing supply.

However, sub-US$60/barrel Brent prices are not expected to be sustainable over the medium term as US shale supply is likely to slow sharply in response to threats to the industry’s profitability. OPEC+ might also decide to pause the unwinding of its cuts if prices decline to sub-US$60/barrel. On the other hand, a de-escalation in trade tensions that supports demand and an early pause by OPEC+ on the unwinding of its supply cuts could lift Brent back above US$70/barrel.

Precious metals

Gold hit an intraday record high of US$3,500/ounce on 22 April 2025. The rally was fuelled by a powerful mix of safe haven and risk-off purchases, spurred in part by US Dollar weakness and policy uncertainty. There were strong inflows into gold ETFs in China. Gold prices have since eased, coinciding with signs of retracement in gold flows in both gold futures and physical gold ETF.

Hope that we may have reached peak uncertainty on tariffs, at least temporarily, has contributed to calmer financial markets. But it may not be easy for the market to look through what is likely to be a further weakening in the economic data. We maintain our bullish outlook for gold, targeting gold at US$3,900 in 12 months’ time. Tariff-driven recession and stagflation risks are forecasted to continue driving gold prices higher after a period of consolidation. Central bank purchases will continue as the trade turmoil further erodes trust in US assets. Gold remains an attractive portfolio diversifier amid shaken safe haven confidence in US debt from the recent failure of long-end US Treasuries to decouple from lower equity markets.

That said, there are downside risks to our gold view: a de-escalation in the US-China trade war, a quicker resolution of trade concerns with trading partners of the United States and an improvement in the US economic outlook could weigh on gold prices.

Currency

The US Dollar (USD) Index’s (DXY’s) underperformance this year has been driven by a confluence of factors – from tariff uncertainty to the erosion of US exceptionalism, and more recently, reports that Trump considered removing Fed Chairman Jerome Powell. Although Trump walked back on his threat, such remarks risk undermining investor confidence, politicising monetary policy, and casting doubts on the USD’s status as a safe haven. The recent mild rebound in the DXY reflected signs of a de-escalation in tariff rhetoric. Hopes of a US-China dialogue (though it may still be early days) and signs of progress on trade deals (likely with India first) have also helped to stabilise sentiment, while safe haven proxies have unwound. Barring the short-term bounce in the USD, we expect the greenback to trade weaker against major currencies as fading US exceptionalism and USD re-allocation flows take centre-stage in the immediate term, with the Fed rate cut cycle potentially coming into focus in 2H2025. Markets are increasingly focused on how Trump’s policies (especially tariffs) are hurting the US economy, US assets and the USD. The USD may also trade softer against Asia ex-Japan currencies and the antipodeans i.e. the Australian and New Zealand currencies, but the decline may be more modest than against major currencies, as we take into consideration the potential implications of tariffs on global growth.

The Euro (EUR) has traded lower after hitting a multi-year high of 1.1570 against the USD. Prospects of US-China trade talks added to a modest de-escalation of tariff fears. This in turn led to the unwinding of stretched USD shorts versus the EUR. To add, several ECB officials also turned more dovish. The ECB’s Philip Lane said that there is no reason to say that a 25 basis points move is always the default and he warned that the EUR’s strength is weighing on the region’s economic recovery via disinflation. Another ECB Board member Olli Rehn said that he sees downside risks to the region’s inflation outlook and that the value of the EUR is important in assessing policy. Separately, the ECB is considering changing its monetary policy strategy to enable more nimble responses to price shocks as the global environment becomes increasingly volatile. Barring short term position adjustments, we remain constructive on the EUR’s outlook. Signs of portfolio flows and reserve diversification may continue to favour alternative reserve currencies such as the EUR.

The USD-JPY (Japanese Yen) cross rate rebounded off multi-month lows after the meeting between US Treasury Secretary Scott Bessent and Japanese Finance Minister Katsunobu Kato made no mention of currency levels. Meanwhile BOJ Governor Ueda’s comments after the latest BOJ meeting was interpreted as being less hasty to raise rates for now. Ueda said it remains extremely uncertain how countries will develop their trade policies and how such policies will affect overseas economies and price trends. He also said that he expected the price trend improvement to stall temporarily. BOJ also downgraded its assessment for growth and inflation, increasing the downside risk for both growth and inflation (versus upside risk for inflation in the last assessment). That said, Ueda did say that the BOJ will raise rates when policymakers become more confident of the outlook. He also added that delaying the BOJ's price target doesn't automatically mean a delay in rate hikes. Overall, we still expect the BOJ to get back to normalising interest rates at some point. Even as the BOJ holds rates for now, we believe the Fed could lower rates at some point in 2Q2025. The Fed-BOJ policy divergence should continue to underpin the broader direction of travel for the USDJPY to the downside.

USD-SGD (Singapore Dollar) continued to trade near recent lows as markets re-assessed tariff developments and a softer USD. Hopes of US-China dialogue (though it may still be early days) and signs of progress on possible trade deals (likely between the US and India first) have reinforced the de-escalation theme. Safe haven trades unwound while currencies in Asia ex-Japan enjoyed a significant lift recently (in part exacerbated by thin market liquidity as well). USD-CNH (offshore Chinese Yuan) fell to near 6-month low of 7.21 at one point, while USDSGD broke below 1.30. Further traction is possible if the de-escalation momentum carries on and the broad USD softens further. That said, given the relatively outsized move recently, near-term risk of a slowdown in the pace of the USD-SGD selloff cannot be ruled out, as markets reassess trade talks optimism.