Since the beginning of this year, with the market's readjustment of expectations for the Federal Reserve and a round of profit-taking, the price of gold has been under pressure and trending downwards.
Since the beginning of the year, the spot price of gold has fallen by about 2%, currently trading at $2022.99 per ounce.
On January 18th, UBS analyst Joni Teves released a research report analyzing the current trend of gold. Teves believes that the &#34;path of least resistance&#34; for gold at the moment is a temporary decline, and factors such as buying on dips and seasonal demand will limit further downward pressure on the price of gold.
<h2>The &#34;path of least resistance&#34; is a decline</h2>
The report points out that since the beginning of the year, the market has readjusted its expectations for a rate cut by the Federal Reserve, and the strengthening of the US dollar has put pressure on gold. The 10-year US Treasury yield has also rebounded from its lows.
As of January 18th, the price of gold has fallen by 2.8%. The report suggests that the psychological level of $2000 may provide some support in the short term, but there is a significant risk of breaking below this support level.
At the end of last year, benefiting from the escalating expectations of a rate cut by the Federal Reserve and geopolitical conflicts that sparked safe-haven demand, the price of gold fluctuated and reached new highs.
Teves believes that the strong rebound at the end of last year triggered a round of profit-taking since the beginning of this year. UBS's CTA model indicates that there is currently systematic selling in the market, and this situation may continue until the end of this month.
<h2>Limited downside supported by positive factors</h2>
However, Teves also points out that there are still positive factors that provide support for the price of gold.
<ul>
<li>Buying on dips limits further decline</li>
</ul>
The continuous decline in the price of gold provides investors with opportunities to establish or increase positions, and it is expected that this trading behavior will ultimately limit the downward momentum.
<ul>
<li>There is a high possibility of gold rising again after the Federal Reserve's shift</li>
</ul>
Teves points out in the report that just the potential condition of the &#34;Federal Reserve shifting to easing&#34; is enough to significantly expand the upside potential of the price of gold.
<ul>
<li>Seasonal demand provides support but may be exhausted soon</li>
</ul>
With three weeks to go until the Chinese Lunar New Year, seasonal demand for gold may boost its price. The high premium of gold in the Shanghai market so far this year also indicates potential demand in the gold market.
UBS predicts that China's gold demand will remain robust this year, as the rising interest in investment will offset the downward pressure on consumer demand. The uncertain economic backdrop has also intensified investors' safe-haven demand.
After the New Year, the gold market is expected to enter a period of &#34;relative calm&#34;. However, UBS points out that if macro factors continue to weigh on the market, gold prices will face downward risks again.
<h2>Waiting for the next catalysts</h2>
Teves believes that despite the recent poor performance of gold prices, the positive sentiment at the end of last year is expected to continue into the new year.
Currently, investors are closely watching whether economic data shows signs of weakness. Once weakness is observed, it will further strengthen expectations for a more accommodative monetary policy stance, supporting further allocation of gold assets in the market and catalyzing a new round of price increases.
The report also points out that geopolitical risks have limited impact on gold prices.
Teves believes that unless geopolitical tensions persist and have a significant impact on inflation or monetary policy expectations, their impact on gold prices will not be long-lasting:
<blockquote>
&#34;We believe that geopolitics only adds to the rationale for allocating gold as a diversification asset, making strategic longs more flexible and shorts more cautious.&#34;
</blockquote>

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UBS analysts believe that the price of gold will continue to decline in the short term, but the downside is limited. The focus will be on a series of catalyst events, including economic data.

The direction with the "least resistance" for the current gold price: downward