XAU/USD bears taking on deeper territory as greenback surges to fresh cycle highs

  • Gold is pressured below a key monthly trendline and continues to bleed out.
  • A sustained downtrend could form in gold should the large CTA selling program catalyze a breakdown in price, bank analysts argue.

At $1,767, the price of gold is down on the day by some 2.2% after falling from a high of $1,812.19 to a low of $1,763.92 so far. The precious metal has been under water for the start of July due to a rebound in the US dollar and has collapsed to the lowest levels since early December while the greenback takes off to a fresh 20-year high.

Global equities have been under pressure due to recessionary fears that have dominated the markets this month so far. European exchanges weakened which has weighed on stocks on Wall Street supporting the bid in the greenback and offers in gold. However, bond yields have moderated which could be a lifeline for the gold bugs since gold offers no interest. The US 10-year note was last seen paying 2.82%, down 3.45% on the day so far.

”Gold is being weighed down by substantial CTA trend followers, analysts at TD Securities explained. ”The margin of safety is razor-thin,” the analysts added.

”A sustained downtrend could form in gold should the large CTA selling program catalyzes a breakdown in prices. After all, as central banks face a credibility crisis, they could remain committed to their battle against inflation and keep rates elevated for longer than recession odds would otherwise imply,” the analysts argue.

”The massive amount of speculative length from proprietary traders in the yellow metal also appears complacent, given that this length was accumulated as early as 2020. The bias remains to the downside in gold.”

Gold technical analysis

The price of the metal is trading below the rising trendline on the monthly precious time frame but the critical fractal lows are located at $1,676.

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