Is gold heading towards further losses?

Although the gold price could recover slightly compared to the preceding week, the question arises whether further price losses have to be expected. First, the technical condition has deteriorated. Secondly - and this may be the more essential factor – those arguments for a flight into gold loss in importance. The gold price could therefore tend further down in a period, which in many cases shows seasonal weakness.

Last week gold traded largely sideways and has found some support at the lower Bollinger band. However, the ADX indicator, which measures the strength of a trend, increased significantly. The MACD indicator tends to decline and has moved away from its signal line. Both indicators point out so that a downward trend has established in Gold. A further negative aspect is that gold is below the moving average of the Bollinger band and this average is also decreasing. This gives an indication that gold test could again the low of 21 May at 1,166.5$/oz.

A negative for the further development of the gold price is also the positioning of the large speculators. At the end of June, the net long position of non-commercials was at 244,725 contracts (Comex Gold Futures), which represented the highest level since mid-December 2009. But within a week, the net long position fell by 35,683 contracts and was at only 209 042 contracts according to the latest report of the CFTC on "commitment of traders' on 6 July. The hedge funds and other large institutional market participants exited gold long positions massively. But it was probably not only large speculators selling gold. The decline of gold holdings at the largest gold ETF, the SPDR Gold Trust, by almost 6 tones to 1314.5 tones in the same period suggests that also retail investors sold gold.

Thus the question is, why do investors leave gold, which, at the end of the first half, many experts regarded as a safe haven against all possible threats - whether deflation or inflation. First, the fear of a global slide into a renewed recession has decreased somewhat, as the recent recovery in stock markets shows. Inflation is not in sight near-term, given the still well below normal capacity utilization. The first indications of the stress tests in European banks have also suggested that the banking system is more stable and resistant, as has been painted on the wall by so many prophets of doom. If investors get slightly more confident, then gold loses its luster as a safe haven and the gold price starts to head lower. The many small investors, who bought massive physical gold out of fear of a crisis in recent weeks, are likely to again the famous last one bitten by the dogs.