Technical Analysis; Gold Bear Market Seen Extending to $1,303
Gold’s recovery to a three-week high last week is over and prices that entered a bear market in April may fall another 5.5 percent to about $1,303 an ounce, according to technical analysis by UBS AG.
The $1,303 level would be the 50 percent retracement of bullion’s rally from October 2008 to its record in 2011, one of the levels singled out in so-called Fibonacci analysis. A “cross lower” in Stochastic momentum indicators would be a bearish signal, UBS said in a report June 7, when prices dropped the most in three weeks.
Gold slid 18 percent this year as an improving U.S. economy increased speculation the Federal Reserve may scale back quantitative-easing measures that helped bullion cap a 12-year bull run in 2012. Photographer: Scott Eells/Bloomberg
June 4 (Bloomberg) -- Stephen Cucchiaro, chief investment officer at Windhaven Investment Management Inc., talks about the outlook for gold prices and investment strategy. He speaks with Tom Keene and Sara Eisen on Bloomberg Television's "Surveillance." Adam Parker, chief U.S. equity strategist at Morgan Stanley, also speaks. (Source: Bloomberg)
“This would suggest the recent recovery is over,” Richard Adcock, a technical strategist at UBS in London, wrote in the report. “The next leg of the bear trend is to be seen down to the long-term 50 percent retracement point at $1,303, which we would set as our objective.”
Gold slid 18 percent this year as an improving U.S. economy increased speculation the Federal Reserve may scale back quantitative-easing measures that helped bullion cap a 12-year bull run in 2012. Prices are now 28 percent below the $1,921.15 record set in September 2011 and investors are holding the least metal through exchange-traded products in more than two years.
Bullion for immediate delivery traded at $1,379.32 by 11:17 a.m. in London, after dropping 2.2 percent on June 7. It had reached $1,423.90 the day before, the highest since May 15. If gold were to fall below $1,350, there may be “nothing” to support prices between there and the $1,200 to $1,225 area, economistDennis Gartman wrote today in his daily report.
In technical analysis, investors and analysts study charts of trading patterns and prices to predict 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 high or low. Stochastics, technical analysis tools based on momentum measures, are often used to identify whether a security’s price is overbought or oversold. (bloomberg)