Gold

Stay clear, gold selloff could get uglier

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suffered its biggest single-day drop since December 2013 on Friday, after robust U.S. jobs data fanned expectations that the Federal Reserve will soon raise rates, and analysts warn that further declines are likely.

"Gold has fallen from grace and its ascent to $1,306 in January now looks to be a false dawn and a distant memory," Howie Lee, investment analyst at Philip Futures wrote in a note on Monday.

"It is now in negative year-to-date territory and the downtrend looks unlikely to stop here. With the Fed moving closer to a rate hike after last Friday's labor report, no amount of buying-on-dips will likely be sufficient to rescue gold from its slide south," Lee said, adding that his 2015 target of $1,100 is now firmly in sight.

The precious metal tumbled almost 3 percent to $1,164 on Friday – wiping out its gains for the year. It recovered a touch on Monday but languished near three-month lows.

Catching a falling knife

With a stronger U.S. dollar and little sign of inflationary pressure on the horizon, Ric Spooner, chief market analyst at CMC Markets, says it's the "worst case of all worlds for gold."

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The dollar has an inverse relationship with gold. One commonly cited reason for this is that a weaker greenback makes gold cheaper for holders of other currencies, supporting demand and prices, and vice versa with a stronger greenback.

In this environment, buying gold would be akin to catching a falling knife, Spooner said.

"Often after a big move like we saw on Friday, there's more to come. If you're thinking of buying, it's best to wait for the market to form a bit of a base," he said.

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The November low of $1,131 is a key level to watch, Spooner said: "If we stay above that level, it suggests a relatively bullish or stable outlook. If we drop below it, it reinforces a longer-term bearish bias with a potential to get down to levels around $1,000."

Taking into account three factors: gold's technicals, a stronger greenback and low inflation, Spooner says the risk is to the downside, barring any "wild card" risk events.

What the charts say

Purely looking at technical analysis, Daryl Guppy, CEO at Guppytraders.com says gold's move on Friday signals that its downtrend has resumed.

"The rally that took place [earlier this year] has failed. Critical support near $1,180 has been broken. This was long-term support starting June 2013 and tested numerous times so strong break below is very bearish," said Guppy.

His downside target for gold is $980 – 16 percent lower than current levels.