Is gold stuck in a bear market?
Published on 30.04.2018 17:19

he US dollar has been on a stellar run over the last few weeks against most of the major currencies and commodities such as gold, which is why the precious metal is feeling the heat at the moment and may face a big test this week as some important support levels approach.

Ever since treasury yields hit 3 percent in the US, investors have been piling into the greenback in search of higher returns at the expense of gold which only rewards investors with capital gains as it is not a yield bearing asset.

Better relations between the US and North Korea have also led to gold losing its appeal as a safe haven asset with the later announcing that they were prepared to give up their nuclear weapons program which just a few weeks ago was unthinkable.

"Easing geopolitical concerns and the strengthening dollar index are the factors which are creating the sell-off," Naeem Aslam, chief markets analyst at Think Markets, said.

 "We are looking at two important support levels - $1,307 followed by $1,300," he said. "A break of these levels would bring more selling pressure." He added,

Even if gold does manage to rebound and sustain some sort of rally, the gains will be limited according to one analyst who noted that the price has traded in a pretty narrow range for more than 6 years and it could still be quite some time before this ends.

"We expect another five years or so of the bear, which means capped price rallies, and lots of sideways price action. Gold's range for the rest of the bear super-cycle we suspect will be close to $1,050 to $1,400," according to Wells Fargo Investment Institute strategist John LaForge.

The material published in on this page is produced by the FIBO group companies, and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC; furthermore it has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

Andrew Masters

Analyst

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