By Barani Krishnan

Investing.com – Gold had its worst week in six months, losing almost 5%, after a knockout punch from its nemesis the dollar, which again proved to be the champ in the latest round of global risk aversion.

“This was a week gold bulls will want to forget, the worst one since the scramble for cash that took place when the coronavirus unraveled financial markets in March,” said Ed Moya, macro analyst at online trading platform OANDA.

, which reflects real-time trades in bullion, was down $2.84, or 0.2%, at $1,864.90 by 1:45 PM ET (17:45 GMT), after striking a two-month low of $1,848.45 on Thursday.

On the futures side, settled down $10.60, or 0.6%, at $1,866.30 per ounce.

For the week, the bullion indicator was down 4.3%, while the futures benchmark lost 4.9%.

“The next target on the downside could be the little area of consolidation from mid-July between $1,794 and $1,847.34,” said Rajan Dhall, gold chartist at FX Street. “The indicators are still looking bearish with the Relative Strength Index still hugging the oversold area.” 

Notwithstanding the punishing week, both measures for gold showed an average year-to-date gain of 20%. 

For gold bulls, it was a reflection of the haven’s strength in the worst of adversity. For bears, it meant a lot to profit from selling the yellow metal down on the back of the dollar rally.

The , or DX, which tracks the greenback’s performance versus six currencies, was up 0.3% at 94.692, after a two-month high of 94.795 set earlier in the session.  DX was up 2% on the week and nearly 3% higher on the month although it remains down more than 1% on the year.

“We are seeing a risk-off environment taking hold, which means that the dollar continues strengthening and there is a lot of pressure on gold prices in the near-term,” said Howie Lee, an economist at OCBC Bank.

After an early plunge in March, when it crashed with equities in a liquidation shock triggered by Covid-19 lockdowns, gold had a phenomenal wave higher.

From a five-month low of $1,451.50, spot gold hit record highs of $2,073 by the first week of August.

But it ran into a severe resistance thereafter, as weakness in other currencies and renewed U.S.-China tensions propelled the dollar as a favorite haven instead.

While charts show that the dollar’s strength was unlikely to yield soon, many still had hopes of a year-end rebound in gold.

“The longer-term outlook remains positive for gold as the global economic recovery will warrant more stimulus as the Northern Hemisphere battles the winter wave of the virus,” said Moya. “Gold will likely attract buyers from here on out as investors start scaling back their bullish bets.” 

Dhall agreed in his post on FX Street. “Into next week the bearishness could continue but the move could get overextended and a pullback could be in order. Over the longer-term time horizon, the market is still in a strong bull trend.”