Gold Hammered, Vulnerable to Sharp Rebound

A brutal start to the week has left gold reeling, with a 4.01% slump ranking as the 88th-largest daily decline in data going back to 1968.

The precious metals complex has also taken a hit, with silver down over 5%, platinum falling nearly 3.5%, and palladium dropping 5%.

The current macro environment is hostile for metals that offer no yield, have holding costs if held in physical form, and are predominantly priced in US dollars, according to analysts.

US real yields have surged to 2.85%, the highest level since November 2008, making it difficult to make a bullish case for precious metals.

However, gold's extreme oversold conditions on the four-hourly chart suggest that a sharp rebound may be in store.

A back-test of six previous episodes where gold reached similar conditions showed that it was higher 24 hours later in four out of six instances.