The gold market fell again this week after a rally, approaching $1700 an ounce.
Bank of America (Bank of America) said in a report that financial markets have overvalued U. S. stocks and may have signalled a sell-off. The last time the market was so bullish, there was a red flag.
The bank focuses on the average recommended allocation by seller strategists.
"the last time the index was so close to a 'sell-off' was in June 2007, followed by a negative 13 per cent return in the following 12 months."
As a result, the current extremely bullish signal in the market means that U. S. stocks are likely to perform very badly in the coming year.
The s & p 500 is up 32% in the past 12 months and almost 4% so far this year.
"the current level of the indicator indicates that the return will be only 7 per cent in the next 12 months, which is worse than the 16 per cent expected in the 12 months after the financial crisis."
In addition, Treasury yields have continued to rise recently, putting heavy pressure on gold.
Gold prices are expected to stabilize between $1707 and $1653 an ounce after the previous plunge by Karen Jones, head of the (Commerzbank) technical analysis team at Commerzbank.
"Gold has fallen to near its 55-month moving average of $1707 an ounce, and a further fall to $1653 cannot be ruled out."
Jones believes that if the downward trend ends, gold will have to recover to the 50 per cent pullback level of its May high, which is around $1760 / oz, or even back to $1794 / oz to fully signal the end of the downward trend. This is followed by the 200-day moving average of $1861 / oz.
In addition, President Joe Biden's $1.9 trillion bailout package also means that inflation expectations will change, and gold, as a hedge against inflation, may benefit.
"it will only be a matter of time before gold prices rise again. Gold, like a tsunami, may soon make a comeback."
