Mind the potential downside if you´re invested in gold, Citi says

Mind the downside if your invested in gold or one of its proxies, analysts at Citi said.

Price charts for the US dollar appeared to be pointing to long-term momentum behind the US dollar index (DXY), "with a currently strongly rising moving average suggesting that we cannot rule out another attempt at breaking up through DXY at 100," analysts led by John H Bergtheil said in a research note sent to clients.

The last time the DXY was trading at the 100-point mark, back in December 2015, gold was changing hands at $1,050/oz. and there was no reason for that not to happen again should the dollar revisit that level.

Indeed, should DXY rise past the 100-point level there was nothing standing in the way of gold dropping below $100/oz., Citi said.

Given that risk, we think gold equity investors should ask themselves what their premise is for accepting gold-equity PE multiples that are up to two or three times greater than the PEs on the diversified miners, given that gold is the metal most-sensitive to the US$.

As of 16:10 BST the spot US dollar index was drifting 0.04% higher to 95.373.