Gold has fallen out of favor with many investors, who no longer see the metal as a safe haven asset. The Fed has created an environment where risky assets are at a premium to safe haven bets, which have had lagging returns. The Cyprus situation failed to create enough panic to drive Gold prices. Technically, Gold is in a vulnerable position, having broken support at 1565. If prices reach the 1520 level, it will likely signify a technical bear market from 2011 highs.
?Fundamentals
Gold futures continue to struggle, as investors appear to have pared down positions in the metal in favor of other assets. Central banks around the globe continue pumping cash into their respective economies, which would normally be seen as a positive factor for Gold. However, it is the non-threat of inflation that allows the central banks to keep the presses printing cash. Gold has lost its luster among many traders as a safe haven asset. Instead, some traders are looking for higher returns in the equity markets, which have been artificially inflated by Fed policy. ETF holdings have fallen to their lowest levels in almost 7 months, which could be a sign that even retail has lost faith in the yellow metal. Barring a sudden uptick in inflationary conditions or a panic in equities, Gold may very well continue lower.
?Technical Notes
Turning to the chart, we see the June Gold contract breaking support at the 1565 mark. If the breakout is confirmed, this could result in prices reaching technical bear market levels, which come in near 1520. The RSI is giving oversold readings, which could help buffer the downside for Gold. However, if a downside breakout occurs on oversold conditions, the sell-off could be explosive. In such instances, fresh buyers attempt to buy value and are quickly forced out of the market, likely adding fuel to selling pressure.
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