Gold just had its worst selloff since March. A floor may be $4,000, says one veteran strategist

Gold futures fell around 1% to $4,321.80 an ounce on Monday after a 3% drop on Friday, marking the largest one-day decline since March 26. Gold also posted a 4.9% weekly loss, the biggest since the week ending March 20. Strategists warn the selloff may not be over, with one veteran trader suggesting a floor may be near $4,000.

Analysis

Gold’s break lower is more than a simple “risk-off” wobble; it signals a likely unwind of crowded momentum/CTA length after a parabolic run, which can create air pockets that persist for days to weeks. In positioning-heavy commodities, the first drawdown often forces de-grossing across adjacent sleeves, so the second-order loser is not just gold miners but also volatility sellers and systematic trend portfolios that were leaning on the same signal. If that de-risking feeds on itself, a technical overshoot toward the low-$4,000s is plausible before natural dip buyers re-emerge.

The near-term macro catalyst set is asymmetric: a firmer dollar, higher real yields, or simply a lack of fresh macro fear can keep pressure on bullion even if the underlying long-term thesis remains intact. The market is currently testing whether gold was pricing in a persistent policy error or just an episodic hedge premium; if Treasury real yields stop falling, the marginal buyer disappears quickly. That makes the next several sessions more important than the next several quarters for trading, because liquidation-driven moves typically resolve faster than fundamental regime shifts.

The contrarian view is that the selloff may be exactly the reset that strengthens the medium-term uptrend. A flush through obvious support can clear leverage, reduce call overwriting, and reset implied volatility, creating a cleaner entry for strategic longs once forced sellers are done. In that sense, the best risk/reward may not be chasing downside, but waiting for capitulation signals and then buying the rebound with tighter risk controls.

Key Decisions for Investors

• Short GC futures tactically for 3-7 trading days only, using a tight stop above the most recent failed rebound; target a further 2%-4% downside if systematic liquidation persists.
• Buy downside protection on GLD via 1-2 month puts or put spreads, financing partially by selling out-of-the-money calls; this is the cleanest way to express continued downside with defined risk.
• Fade quality gold miners on strength over the next 1-2 weeks: short GDX against a long in the underlying bullion complex only if miners fail to outperform on any rebound, since miners usually de-lever harder than spot.
• Set a staged long entry in GLD after a capitulation day and stabilization in real yields; if spot holds the low-$4,000s for several sessions, risk/reward shifts from momentum short to tactical mean-reversion long.
• Avoid adding fresh long exposure in leveraged gold proxies until positioning flushes; the best setup is likely post-liquidation, not during the first break.