After a rally, gold prices turned lower again this week, with spot gold prices falling below $1710 an ounce, very close to the support of the 1700 round mark.
Suki Cooper, precious metals analyst at Standard Chartered Bank (Standard Chartered), said the sell-off in the gold market was likely to intensify further.
The gold market has had a very bad first two months so far this year, falling more than 6% in January and more than 1% in February. Gold prices this week hit their lowest level since June last year.
Cooper points out that although the gold market is oversold, there is more downside below. Gold ETF will be a major risk, investors continue to reduce their holdings may cause gold prices to fall further.
"Total ETF holdings in gold fell to their lowest level in seven months, becoming one of the downward pressure on gold prices, as it is uncertain how long investors' holdings will last in the gold price downturn."
The rate of gold ETF outflows has intensified during the recent surge in Treasury yields.
Expectations of US fiscal stimulus and fears of rising inflation have boosted Treasury yields. It also advanced market expectations of an interest rate hike by the Federal Reserve. But this expectation is premature, but it was the same expectation that contributed to the sharp fall in gold prices in April 2013. "
Cooper believes that gold ETF is a key factor that the market needs to pay attention to.
But while short-term bears seem to have the upper hand, long-term fundamentals are still positive.
"loose monetary policy, rising inflation expectations and expectations of a large stimulus programme can all support gold's long-term trend."
In addition, India's gold imports began to recover, hitting the strongest since 2013 at the beginning of this year. And Swiss customs data also show that gold exports to the United States have increased, and British gold imports were also strong at the beginning of the year.
"Investment demand is weak, so physical gold demand is likely to be the bottom support for gold prices."
