Will it end here or go even lower?
There’s no clear answer as gold continues to seek a bottom in $1,600 an ounce territory.
However, as the path of least resistance seems lower, gold bears will likely have more successes in the near-term than bulls — despite potential inflationary pressures from President Biden’s oncoming $1.9 trillion pandemic relief bill that should be friendly to supporters of the yellow metal.
In Monday’s trade, gold for April delivery on New York’s Comex settled down $20.50, or 1.2%, at $1,678 an ounce, sliding for a ninth time in 11 sessions. Its session low was $1,673.40, a new bottom since April 2020.
The spot price of gold, which fund managers sometimes use more than futures to gauge direction, was down $17.85, or 1%, at $1,682.07 by 1:52 PM ET (18:48 GMT). Spot gold’s intraday low was $1,676.93 — a bottom since June 2020.
“To say that gold’s price action is unimpressive is an understatement,” said Jeffrey Halley, senior markets strategist at online brokerage OANDA. “Gold is climbing the stairs on one leg while descending by jumping out of the 10th-floor window.”
With bond yields benchmarked by the U.S. 10-year Treasury note and the the dollar — gold’s archrival — spiking again Monday, the shiny metal could remain on “life support”, Halley said “If dollar strength continues, a fall to $1600.00 an ounce is entirely possible later in the week. Gold needs to recapture the $1760 region to suggest that the worst is over.”
In the event of a rebound from oversold RSI, or Relative Strength Index, conditions, gold could spend the subsequent few sessions consolidating in a $1690-$1720 range, he added.
At under $1,680 an ounce, gold prices are down nearly 12% on the year. From their August record high of nearly $2,090, Comex futures are down about 20%, technically placing gold in a bear market.
Gold has been on a slow-burn meltdown over the past month, getting swept up in a stock market rout triggered by surging bond yields and the dollar, despite its so-called standing as an inflation hedge.
The yellow metal’s departure from the path of inflation has been inexplicable to many of its faithful as Biden’s $1.9 trillion pandemic relief bill should land the United States with larger budget deficits and higher debt-to-GDP ratios going forth. These should logically weigh on the dollar and send investors toward gold. But the opposite is happening instead.
“Gold has been undercut by cheerful economic optimism over a robust economic recovery and faster than anticipated rises in bond yields,” Axi’s chief global market strategist Stephen Innes said. “The market may have fallen too steeply, too quickly.”