Gold and silver have failed to shine despite falling bond yields in recent days, and today both metals slumped hard. The metals’ poor performance may be due to several reasons, rather than just one factor. For a start, the US dollar has managed to hold its own rather well despite the Fed’s U-turn on interest rates. The dollar bears – and by extension gold bugs – have been left frustrated because of the fact other major central banks have also turned dovish, thereby keeping the dollar supported indirectly as foreign currencies tumbled. On top of this, the ongoing economic slowdown and renewed weakness in emerging market currencies has raised fears over demand for metals in their physical form, with falling inflationary pressures further dampening its need as an inflation hedge. Furthermore, with palladium imploding, this has reduced the appetite for precious metals even more. Palladium has been going up the stairs since August, but over the past few days it has taken the elevator on the way down. Gold’s breakdown below the technically-important $1300 handle no doubt gave rise to technical selling today, which undoubtedly accelerated the move down. Ultimately, though, we think the downside could be limited for gold. The sell-off has come on the back of a sizeable rally from last August. A correction was always needed to shake out the weaker hands and lure bargain hunters in. While it might be too early to talk up the prospects of a bottom for gold, it is worth noting that the precious metal has now reached a key technical area around $1290, the base of its previous breakout. It needs to reclaim that $1300/$1305 area first to repair some technical damage. However, more pain could be on the way should the most recent low $1281 gives way now.