Gold has hit its lowest level since March, moving further away from record levels that were within reach just five months ago, with prices heading toward a so-called “death cross” that could lead to further declines for the precious metal.
“Gold kryptonite is fueling rising Treasury yields and a stronger dollar,” Edward Moya, senior market analyst at OANDA, told MarketWatch.
“Wall Street is fundamentally changing the direction of money flows, and that is clearly not the way of gold,” he said. “Bonds are suddenly attractive and that has killed gold’s near-term prospects.”
December gold futures GC00 GCZ23 fell $18.90, or 1%, to close at $1,847.20 an ounce on Comex Monday. This was the lowest contract close with the highest activity since March 9, according to Dow Jones Market Data. Prices lost 5.1% in September and 3.3% in the third quarter.
The last time gold traded at such lows was over six months ago, when the U.S. regional banking crisis sparked an influx of buyers, Alex Kuptsikevich, senior market analyst at FxPro, said in market commentary on Monday. “Then as now, pressure on gold came from rising U.S. Treasury yields and a reassessment of expectations for higher long-term interest rates.”
Gold’s decline was followed by a rise in early May to $2,055.70, the second-highest close on record and the highest for a most active contract since August 6, 2020.
Gold prices now appear to be nearing reaching a “death cross” – a technical term that generally indicates a bearish trend that occurs when an asset’s short-term moving average falls below a longer-term moving average. Gold’s 50-day moving average in December was $1,948.34, while its 200-day moving average was $1,982.13 on Monday, FactSet data shows.
Gold is in the “danger zone” and will fall below $1,800 if the 10-year Treasury yield rises above 5%, Moya said. In Monday trading, the yield on the 10-year Treasury note is BX:TMUBMUSD10Y
was at 4.674%, up from 4.572% on Friday after the U.S. government averted a shutdown over the weekend.
However, FxPro’s Kuptsikevich said gold is “oversold” in the short term, creating the potential for a corrective bounce.
Last week, gold accelerated its decline by breaking support from the downtrend channel of the past few months, he said. “It may well be that this acceleration of gold’s decline is a sign that the decline is nearing its end, but it is still a case where it is better to be a little late to the rally than to buy in. “
Moya believes gold “will have its moment in the sun when it peaks [U.S.] Dollars are available.”
On Monday the ICE US dollar index
The DXY rose 0.6% to 106.87, near its highest level so far this year. The dollar’s strength may make dollar-denominated gold more expensive for foreign buyers.
“A recovery towards $2,000 seems unlikely at this point” for gold, Moya said. However, “the uptrend could ultimately target the $1,925 region.”