The "depreciation trade" advantage for gold prices has been exhausted, says Saxo Bank: Investors have sold all they can.

Golden Ten Data reported on June 26 that this week, gold prices fell below the $4,000 per ounce mark, signaling a sharp reversal in the multi-year bull market that had persisted previously. Last year was gold’s best-performing year in four decades, thanks to strong support from the so-called “devaluation trade” — where, due to the increasing fiscal debt burdens of developed economies, investors showed a preference for allocating assets to alternatives such as gold. However, this trade has since gradually unraveled. “When a crowded bullish trade comes under pressure, investors tend not only to sell what they want to sell but also what they are able to sell,” said Charu Chanana, Chief Investment Strategist at Saxo Bank. “Over the past year, gold has been a highly profitable trade, so when portfolios need to reduce risk, it can become a source of cash.” Meanwhile, the dollar exchange rate is on track for a second consecutive week of gains. Since last week’s Federal Reserve meeting, the dollar has appreciated by 1.7% against other currencies.