(www.investorideas.com
Newswire) a go-to platform for big investing ideas, including gold and
silver stocks issues market commentary from deVere Group.
Gold is falling further into bear territory due to leverage and
government bond yields, but it is likely to bounce quickly on a
de-escalation of the Iran war
This analysis from the CEO of one of the world’s largest
independent financial advisory organisations comes as bullion
extends a sharp sell-off, with prices sliding more than 20% from
late-January highs above $5,500, and posting one of the steepest
weekly declines in over a decade.
Nigel Green of deVere Group says: “A significant part of this
drop is likely being driven by leverage.
“Investors who built large positions using borrowed capital
are now being forced to unwind as volatility spikes, and that
accelerates downside momentum.”
He continues: “Margin calls are pushing traders to liquidate
gold positions to raise cash. Gold had been a standout performer, so
it becomes an obvious source of liquidity when markets turn more
turbulent.”
Recent moves in currency and bond markets are intensifying the
pressure.
The US dollar index has strengthened in recent sessions, while
benchmark yields in both the US and UK have moved higher, raising
the opportunity cost of holding non-yielding assets.
The deVere chief executive comments: “Rising yields in the US
and UK are a critical factor. Investors can now secure more
attractive returns from government bonds, which reduces the relative
appeal of holding gold, particularly in the short term.
“A stronger dollar compounds the problem. Gold is priced in
dollars, so a firmer greenback makes it more expensive for
international buyers and dampens demand.”
Ten-year US Treasury yields have pushed higher again, hovering
around the mid-4% range, while UK gilt yields remain elevated
following persistent inflation data.
Market expectations for aggressive rate cuts have been pared back,
reinforcing the upward pressure on yields.
“Markets are reassessing the pace of monetary easing. Sticky
inflation keeps yields higher for longer, and gold reacts quickly to
that shift because it offers no income,” explains Nigel Green.
Despite the scale of the pullback, he argues that the current move
reflects positioning rather than a breakdown in underlying demand.
“Gold’s rally over the past year has been
underpinned by structural forces, including sovereign accumulation,
geopolitical risk, and fiscal concerns. Those drivers haven’t
disappeared.”
Central banks continue to play a dominant role. Global official
sector purchases have exceeded 1,000 tonnes annually for several
consecutive years, with emerging market institutions, such as the
People’s Bank of China, leading the trend as part of a broader
diversification away from the dollar.
Nigel Green says: “Central banks are still accumulating at a
historically strong pace. This is strategic, long-term allocation
designed to strengthen reserves and reduce exposure to currency
volatility.”
He continues: “Demand from sovereign buyers creates a powerful
floor under the market. It limits the downside and sets the stage
for sharp rebounds once short-term pressures ease.”
Geopolitics remains the key catalyst for the next major move. Gold
initially surged on safe-haven demand at the onset of tensions
involving Iran, before reversing as markets shifted toward
cash preservation and yield opportunities.
Nigel Green says: “The pattern is familiar. In the early phase
of a crisis, gold attracts inflows. As the situation evolves,
investors often pull back to manage liquidity and risk
exposure.”
Any credible signs of de-escalation in Iran would “change the
dynamic quickly,” with capital that has been sidelined or
redirected would likely return to gold at pace.
He concludes: “This is a leverage-driven washout colliding
with higher yields.
“Forced selling is overwhelming the market, but it’s
temporary.
“We expect a shift in sentiment around Iran would unleash a
rapid snapback, and gold would move higher with real force.”
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