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Deutsche Bank thinks gold has space to move lower

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(Kitco News) - German investment bank Deutsche Bank said it sees further weakness to come for the yellow metal. In their latest note, strategists forecast that the gold price could move as low as $1500/oz. 

"We see downside as investment demand weakens further while rising physical demand in China and India provides an offset but fails to keep pace," the report said.

Deutsche went on to say: "The behavior of gold in the first quarter lends credence to the importance of real yields. While the initial rise in nominal yields was neutralized by higher inflation expectations, Feb/Mar steepening outstripped reflation. The lift-off in real risk-free yields from record lows has potential to sustain the gradual unwinding of investment accumulation since early 2020, now about 1/3 of the way through."

When speaking about physical gold, the bank said, "We do not see demand elasticity of China and India physical demand providing sufficient support before $1,500/oz."

Although the German bank is bearish on gold, it is a little more optimistic when it comes to silver.

"We think silver will be comparatively resilient in a global recovery, although more so under risk-friendly steepening than disorderly tantrum-like bouts, in which cases silver tends to weaken more rapidly than gold," the report said.

As you can see from the weekly gold futures chart below, the price has retraced from the all-time high seen in August 2020. The red shaded area on the chart is where Deutsche Bank suggests the price may hit. There is some traffic and stickiness on the chart there, so it could be a possibility that there might be some support there. At the moment, the currency wave low support stands at $1673/oz and for the retracement to continue, the bears would need to take out that zone. Since last week, the bids have stepped in to support the price, but we have the small matter of the FOMC meeting to deal with tonight. 

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