Gold prices fell more than 1% on Monday as the dollar climbed to two-year highs and US Treasuries rose. TD Securities strategists say that if the yellow metal sees a daily close below $1,875, gold could see a significant decline.
“If gold closes below this level, there may be a serious decline”
Spot gold prices fell 1.15% to $1,860 at the time of writing, according to TradingView data. U.S. gold futures, on the other hand, were last traded at $1,859, down 1.26%. Hence, the gold price dropped below the $1,875 mark. TD Securities strategists state that if the yellow metal sees a daily close below this level, the price of gold could take a serious fall. Analysts evaluate:
Momentum signals are deteriorating rapidly in the yellow metal, setting the bar too thin for systematic trend follower purges. We estimate that gold prices would only need to be closer to $1,875 to catalyze a major selling program that could send the yellow metal below the psychologically important 200-DMA range.
For now, there is still room for positions to decrease further. According to analysts, trend follower liquidations can provide fuel to start a liquidation event another leg lower.
Yellow metal depreciates as the Fed falters
Meanwhile, the dollar, which makes bullion more expensive for offshore buyers, is also a rival. While considered a safe haven, it hovered near its highest level in two decades as 10-year US Treasury yields hit over 3% on expectations of higher interest rates.
Kriptokoin.com on Friday, two of the Fed’s hawks returned to the view that the US central bank had missed the boat in the fight against stubborn inflation, and it’s long since the Fed started raising interest rates in March. He referred to the tightening financial conditions that started earlier. While gold is considered a hedge against inflation and economic uncertainties, rapid interest rate increases in the US increase the opportunity cost of holding non-yielding bullion.
