Moving into the new trading week, many Wall Street experts warn that gold prices are at risk of continuing to fall deeply after a strong sell-off at the end of last week. Analysts believe that rising US bond yields, strengthening the USD and expectations that the Fed will maintain higher interest rates for longer are putting great pressure on the precious metal.
Mr. Marc Chandler - Managing Director of Bannockburn Global Forex - said that gold has signaled a clear weakening when falling to an 8-day low last weekend.
According to him, gold prices previously fluctuated in the range of 4,638-4,773 USD/ounce, but broke the important support zone before the weekend holiday.
Gold prices have never traded below 4,500 USD/ounce since the end of March. If this mark is broken, the price may fall to the 4,350 USD/ounce range," he warned.
Sharing the same view, Mr. Alex Kuptsikevich - senior market analyst at FxPro - said that the selling side is still dominant in the gold market.
He said that the 4,700 USD/ounce zone currently plays a strong resistance role, while the trend of creating low peaks gradually since the end of January shows that downward pressure has not ended.
Selling pressure could push prices back to the 4,350 USD/ounce, or even lower," he said.
According to this expert, the downward momentum of gold currently comes not only from technical factors but also influenced by the oil market, the USD and the disappointment after the US-China meeting that did not bring the expected big results.
Experts at CPM Group also recommended selling gold in the short term after the sharp decline last weekend.
This analysis group believes that the increase in US government bond yields to nearly a year's high has put pressure on many types of assets, including gold.
"If gold breaks the 4,380 USD/ounce mark, the next support area could be 4,200 USD/ounce" - CPM Group commented.
According to experts, the market is currently particularly concerned about the risk of prolonged inflation as oil prices continue to escalate due to geopolitical tensions related to Iran.
Mr. Adam Button - Head of Currency Strategy at Forexlive. com - said that the yield of 30-year US bonds has now exceeded 5.1%, while oil futures prices continue to rise.
The market is starting to consider the possibility of interest rates rising again," he said.
According to Mr. Button, investors are also disappointed that the meeting between Mr. Donald Trump and Chinese President Xi Jinping did not create a major breakthrough as previously expected.
Mr. Daniel Pavilonis - senior commodity broker at RJO Futures - said that the gold market is currently strongly affected by risk avoidance sentiment and profit-taking activities after a period of hot growth.
“The market is currently quite unstable. Investors are withdrawing some of the high valuation from their assets,” he said.
However, Mr. Pavilonis believes that the long-term trend of gold has not been completely broken as buying power from global central banks remains.
In the end, I still thought gold would continue to move up gradually," he assessed.
However, this expert warned that if gold does not hold the 4,500 USD/ounce mark, the downward trend may expand more strongly, even fall back to the high of the 3,800 USD/ounce mark.
In the opposite direction, some experts still believe that gold may have a technical recovery this week if selling pressure on the futures market cools down.
Mr. Darin Newsom - senior market analyst at Barchart. com - said that last week's sell-off may have relieved most of the short-term selling pressure.
If buying power from central banks continues to be maintained, gold could completely have a short-term recovery" - he said.
