The precious metal saw its worst weekly performance in seven last week and is keeping at that downside move so far this week. The slide comes amid higher bond yields which also is inadvertently propping up the dollar.

Given prevailing market sentiment, it is tough for gold to turn things around unless we also see bonds stop puking all over. If yields are going to keep stretching higher, gold prices are likely to be dragged further to the downside. And that comes despite the backdrop of major central banks starting to pivot away from tighter monetary policy.

From a technical perspective, the test of the 200-day moving average (blue line) now for gold is a crucial one. The level is seen at around $1,902.90 and a break below that as well as the $1,900 handle will set off alarm bells with a steeper drop impending.

The next key support will sit closer to the February to March lows just above $1,800. These were levels I previously highlighted in the linked post above and they are still holding true for now.

At some point, when recession signals light up and central banks are forced to move towards cutting rates, you would expect gold to flourish. That remains the key underlying factor for a more bullish structural proposition in gold but as always is the case, the bond market needs to attest to that first and foremost. And right now, that is certainly not the case yet.

This article was written by Justin Low at www.forexlive.com.