According to market analysts, the market for the precious metal gold is officially in a bear market and prices may remain low for the next few weeks. Moreover, while the macroeconomic backdrop has been grim, the popular safe-haven asset has lost 17.50% in value against the US dollar over the past four months.
TD Securities Analysts Say Fed Rise Could Undermine Gold Price
There is no doubt that cryptocurrency economy is experiencing a bearish slump as some of the leading digital currencies have lost 65% to 90% in value. Well-known safe-haven and investment asset gold has also been in decline since the precious metal hit an all-time high (ATH) of $2,074.60 per ounce of fine gold on March 8, 2022. Gold is currently trading for $1,711 an ouncesince in 134 days the asset lost 17.50%.
According to Kitco’s Nils Christensen on July 18, analysts at TD Securities said that gold will have to deal with some pressure over the next few weeks. “Investors cut the net length by a very large 6% of open interest (3 million ounces) as it became clear that real rates at the short end of the curve would continue to rise and there was little chance of growth as nominal policy rates jumped up and inflation expectations have weakened along with the looming economic downturn,” writes market analysts at TD Securities.
The Canadian investment bank and financial services provider added:
Continued Fed hikes and slower economic activity should see the length of gold continue to shorten, with prices likely to remain under pressure in the coming weeks.
Bear market triggered immediately after reaching gold top, Ukraine sells billions of gold
Analysts at TD Securities aren’t the only ones who think gold is in a bearish phase, as moneyweek.com’s chief commentator on gold, commodities, currencies and cryptocurrencies, Dominic Frisbee, said that gold was in a bear market on March 31, 2021. “This is a bear market,” Frisbee wrote at the time. “You get tradable rallies in a bear market, but a bear market is a bear market. They may take longer than you think. They may “make no sense”. But they don’t last forever.”
On Monday, Kitco’s Christensen explained that “for the first time since May 2019, speculative gold positioning has decreased by 6,133 contracts.” Commodity analysts at Société Générale also said that “the gold market has clearly turned bearish.” Besides, reports note that Ukraine has sold billions of gold reserves since the start of the war with Russia. Kateryna Rozhkova, deputy chairman of the National Bank of Ukraine (NBU), told the press that $12 billion worth of gold was sold to replenish the country’s stocks of goods.
“We are selling (this gold) so that our importers can buy goods that the country needs,” Rozhkova said in a July 17 statement.
TD Securities Market Strategists: ‘Gold Will Start to Feel Pain Under Fed’s Hawkish Regime’
In addition, at the end of June, the United States and the group of seven leaders sanctioned new imports of Russian gold in an attempt to strike at Vladimir Putin. The hawkish Fed is dooming the value of gold. investor note from TD Securities analysts. “As gold bugs tumble like dominoes, prices have since broken through various support levels on their way to $1,600 an ounce,” the analysts explained. “As prices are now challenging pre-pandemic levels, the largest group of speculative gold players will begin to feel pain from the Fed’s hawkish regime as their entry levels are tested.”
As for the leveraged gold positions, market strategists at TD Securities believe that “these massive positions are the most vulnerable, suggesting that the yellow metal remains prone to further declines.” Meanwhile, as gold experienced a significant decline, the price of silver per ounce followed the fall of the yellow metal. silver price fell below $20 an ounce for the first time in two years. Coincidentally, as August approaches, the value of gold is approaching the price low it hit in August 2021, when it fell below the $1,700 mark.
What do you think of the analysts talking about the gold bear market? Do you expect gold to fall below its current value? Let us know what you think about it in the comments section below.
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