According to one strategist, gold has created a “death cross” pattern, signaling a dire outlook for the commodity as it is hit by a strong dollar. A cross forms when a security’s 50-day moving average falls below its 200-day moving average. This is a chart pattern that technical analysts and strategists consider a negative indicator for the asset. The breach is the latest signal that gold, which has fallen to levels not seen since 2021, is struggling, according to a Thursday note from Ned Davis Research. The company downgraded gold’s bearish outlook from neutral. Tim Hayes, chief global investment strategist at Ned Davis, wrote: “The downtrend remains intact with relatively restrained central bank policies. “We’re lowering the price.” Gold fell as the US dollar strengthened. The prices of these two assets often move in opposite directions, as a stronger dollar makes it difficult for people in other countries to buy the precious metal. Hayes has a “decisively bullish” outlook on the dollar as it rallies to a roughly 20-year high. Rising bond yields and expectations of tighter monetary policy from the Federal Reserve to combat inflation boosted the greenback. “And that is bad news for gold,” Hayes wrote. Simultaneously with gold showing a cross signal, the dollar is creating a “golden cross” pattern, according to the note. (The “golden cross” signal occurs when the 50-day moving average crosses above the 200-day and it is generally seen as a positive indicator.) Hayes wrote: Gold formed a dead cross at the same time the dollar created a golden cross pattern about a third of the time since 1979. In these occurrences, gold lost 1.5 % per year while the dollar is up 3.5% over the same period. Another bearish indicator for gold is the continued bearish trend in the commodity, according to Hayes. Other metals such as silver, copper and aluminum posted 252-day lows as July began, the note said. The strategist recommends that investors allocate too much cash, and keep low-weight stocks and bonds.
