Gold has lost its luster.
Another wave of selling pressure has hit the gold market, but analysts are starting to question just how much longer the current downtrend can continue. Many see the July 2017 low at $1,204 as a key line in the sand.
Gold is trading near fresh 12-month lows Thursday as investors continue to pile into the U.S. dollar. August gold futures last traded at $1,217.90 an ounce, down almost 1% on the day. The precious metal has lost nearly 10% in the last three months. Meanwhile, during the same period, the U.S. Dollar Index has risen 7% as it trades at a new 1-year high at 95.47 points.
While gold could have room to move lower in the near-term, many analysts say that this is the capitulation move they have been waiting for to clear the last of the sellers out of the marketplace.
Bill Baruch, president of Blue Line Futures, said that he remains long-term bullish on gold and continues to see value at current levels.
"I look at this market and I don't see anything that is going to keep gold at these levels for very long,' he said. "I don't see U.S. dollar strength forever. I believe that gold will be at $1,300 this fall."
Fawad Razaqzada, technical Analyst at City Index, is also looking for a top in the U.S. dollar. He noted that most of the good news like higher U.S. interest rates and positive economic growth has been priced into markets.
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"Because of the U.S., my outlook on gold remains bearish," he said. "But a short-squeeze rally is growing and could be just around the corner. I don't think the U.S. dollar has room to move much higher."
Baruch said that the one wild card for global currency markets and gold is the Chinese yuan. The yuan has been dropping sharply as the Chinese government looks to try and boost its economy. However, Baruch added that this policy might soon switch as the government realizes that is a weak currency policy is working efficiently.
In a report Thursday, Jasper Lawler, head of research at London Capital Group, said that seasonal factors could continue to keep the pressure on gold. He added that he sees prices testing critical support at $1,200 an ounce in the near term.
"It is often during the late summer months when investors start buying again. Seasonal tendencies suggest the price still has another month to find levels with which to build a base," he said. "As long as bulls hold the line steady above $1200, we may see a mean reversion play out towards the 200-day moving average."
Razaqzada said that he is out of the gold market for now until he sees prices rally above $1,236 an ounce, which he considers a critical near-term resistance.
"I want to see signs that sellers are trapped that they can't push the price lower and are forced to sell at higher prices," he said.