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Market participants are yet again headed into a New Year with a bearish outlook on gold. This reflects the ongoing adjustments in the US interest rate cycle. It is the consensus view that the US Federal Reserve will start tightening monetary policy by June, which will push real interest rates higher and encourage further gains in the US Dollar even from current levels. The US Dollar Index is trading close to 90, a significant technical resistance. Moreover, according to Deutsche Bank, if we value gold in real terms, relative to income, relative to physical assets and relative to the US equity market, then on average gold prices would need to fall towards $905 per ounce to bring its valuation against these various indicators back towards it long run historical averages. The precious metal has been hammered over the last 18 months even though all the forecasts of rising US 10-year yields and US monetary tightening have not materialized. US Federal Reserve chief Janet Yellen has remained as accommodative as she could in light of the anemic recovery in the US labour market. But gold failed to rally as it was pricing in the QE (quantitative easing) taper and the eventual interest rate hike. That is why Currency Corner believes that all the bearish variables are priced into gold at current levels.