Analyst: Gold sell-off may trigger a chain reaction, with some investors even selling other assets to cover losing positions

BlockBeats News, February 6, analyst Jeremy Boulton stated that the sudden drop in gold prices and its rapid spillover to other metals could trigger a chain reaction, with investors possibly choosing to take profits or even sell other fundamentally sound assets to cover losing positions. There are currently large unrealized profits waiting to be realized in the market. Except for AI-related stocks, the overall stock market remains strong; in the forex market, investors who participated in the carry trade boom over the past year by investing in high-risk, high-yield currencies have also made considerable gains. Although such bets are relatively risky, the returns have been extremely lucrative, and the same applies to investments in the stock market and the euro.

When gold prices fall, the EUR/USD exchange rate also declines simultaneously, prompting traders to take profits. Although the crowding of long positions in EUR/USD is not as severe as in gold, signs of overbought conditions have already appeared during the breakout above 1.20. As risk aversion intensifies, the previously sold-off US dollar is being bought back, providing traders with a reason to take profits. (Golden Ten Data)