Gold is getting hammered as the dollar soars, and it could plunge another 7% from here

Gold is losing its luster.

The metal has fallen 5 percent in the last three months as the U.S. dollar has gained ground, in turn depressing gold prices. The commodity hit a fresh 2018 low Wednesday.

Boris Schlossberg, managing director of foreign exchange strategy at BK Asset Management, told CNBC's "Trading Nation" on Wednesday that the bottom is nowhere near in for gold. Here are his reasons why.

• Gold has fallen as U.S. interest rates and the U.S. dollar have risen meaningfully in recent months. The metal is typically a story about yield; rising interest rates tend to make gold (a nonyielding, dollar-denominated asset) less attractive.

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• The benchmark 10-year yield's breach of the 3 percent level for the first time in four years fueled this move.

• Gold is usually more so a hedge or a speculative instrument, rather than an investment. At this point, if investors see bond yields rallying further, toward 3.25 percent, gold will likely continue its descent.

• The only thing to support gold here would be some kind of geopolitical event, which could spur investors flocking to gold. Without that kind of catalyst, gold is likely to see a move down to $1,200 per ounce, or 7 percent below current levels.



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Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

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