Technical Analysis; Gold Seen Falling to as Low as $1,150/Ounce

Gold may resume declines as soon as next week, triggering a drop to about $1,150 an ounce, according to technical analysis by Auerbach Grayson & Co. and may be further decline to $991 

The attached chart shows that gold has broken below its trend line from the 2008 low and its 50-week moving average, and went beneath the 200-week moving average for the first time in 11 years. A price rebound that saw it climb 12 percent since it dropped to a two-year low of $1,321.95 in London on April 16 will probably end in a few days or weeks and selling should resume, according to Richard Ross, global technical strategist at the New York-based brokerage firm.

“Ultimately we see a decline down to $1,150,” Ross said yesterday by e-mail. The target is near a 61.8 percent retracement of the metal’s rise from the Sept. 12, 2008 close to the Nov. 11, 2011 close, one of the levels singled out in so- called Fibonacci analysis, he said. “Importantly, we must consider further selling down to the magical round number at $1,000.”

Gold entered a bear market on April 12, when it closed at $1,483 as optimism that a U.S. recovery will curb the need for stimulus cut demand for a protection of wealth. Gold traded at $1,475.28 by 7:55 a.m. today in London, down 12 percent this year.

In technical analysis, investors and analysts study charts of trading patterns and prices to forecast changes in a security, commodity, currency or index. Fibonacci analysis is based on the theory that prices rise or fall by certain percentages after reaching a new high or low.(bloomberg)