GO
Loading...

Gold faces 'punishment' if US data are strong

Risks of an escalation in conflicts in Ukraine and the Middle East will continue to feed demand for safe-haven assets such as gold, helping support prices above $1,300, according to CNBC's latest sentiment survey of strategists and traders.

But downside risks remain pervasive and gold bears warned bullion may suffer this week if U.S. economic data - which include consumer prices, durable goods orders and existing home sales - prints on the higher side of the range, building expectations that the Federal Reserve may raise interest rates sooner than expected.

"Any improvement in the U.S. economic data is going to continue the punishment for gold," said Naeem Aslam, chief market analyst at Ava Trade.

Read MoreWhy gold is set for its 7th week of gains

"The main support is near $1,270 and resistance at $1,340."

Gold bulls were severely wrong-footed last week as prices snapped a six-week winning streak, hit by a firmer U.S. dollar after Federal Reserve Chair Janet Yellen's somewhat hawkish acknowledgement of improvement in the labor market.

Last week's slide in the gold market was punctuated by Thursday's 1.5 percent gain - the biggest in a month - as some investors sought protection after the downing of a Malaysian passenger plane in eastern Ukraine. But the flurry of safe-haven buying wasn't enough to stave off a near 2 percent slide in the price over the course of last week.

Read MoreGold appetite at 4½-year low in June

Still, any indication of the conflicts in Gaza, Ukraine or Iraq escalating may continue to keep gold well-bid. "I see the uncertainty surrounding the escalation of geopolitical events, especially surrounding Ukraine and Iraq, to continue providing short-term support for gold prices," said Anthem Blanchard, CEO of Anthem Vault.

Getty Images

The "tilt" is toward higher prices for safe haven assets, said Scott Carter, the chief executive officer of Los Angeles-based Lear Capital. "Gold is still showing strong fundamentals despite the recent profit taking that occurred last week."

IG Markets' chief market strategist Chris Weston was more cautious but called for 'modest upside' in the gold price this week. "Naturally, we'll see how Ukraine plays out, but key support is $1,292," he said.

Read MoreCrisis in Ukraine could 'explode' gold: RBC expert

However, many are questioning gold's status as a safe-haven during times of financial, economic or political crises due to the metal's apparent failure to perform strongly despite the numerous tail-risks globally.

Gold's decline from its peak above $1,900 in September 2011 to below $1,200 in 2013 proves the metal is "a lot more dangerous of an investment than most had believed," said Yoni Jacobs, Chief Investment Strategist, Chart Prophet Capital. "It fell by approximately 40 percent to $1,200, where it found support twice so far. Something that plummets 40 percent to the downside should not be called a 'safe' haven."

Contact Commodities

  • CNBC NEWSLETTERS

    Get the best of CNBC in your inbox

    › Learn More