Gold has dipped below $1,800. A break under critical support at $1,780 would signal a trend change, strategists at TD Securities report.

Bias remains to the downside

“For the time being, gold prices are managing to hold onto a critical threshold for a change in trend by year-end at $1,780, as rising recession odds fuel inflows for gold as a safe-haven asset.”

“The margin of safety is razor-thin as a break below $1,780 would imply that gold would succumb to the weight of the most hawkish central bank regime since the 1980s. This scenario implies that a sustained downtrend could form in gold should the large CTA selling program catalyze a breakdown in prices.”

“As central banks face a credibility crisis, they could remain committed to their battle against inflation and keep rates elevated for longer than recession odds would otherwise imply.” 

“A break below the $1,780 critical threshold could spark additional outflows on the horizon, which suggests the bias remains to the downside in gold.”