Gold May `Bottom' in Next Week on Low Cycle, Then Rise: Technical Analysis
A fifty gram gold bar, front, sits alongside gold bars at Goldcore Ltd., in London. Photographer: Chris Ratcliffe/Bloomberg
Gold, heading for a third weekly decline, may reach a short-term low in the next week and climb higher, according to technical analysis by independent analyst Jim Stellakis.
The attached chart shows prices formed a low about every 35 days in the past 10 months, with each new trough being higher than the last except for at the beginning of February. A failure to repeat the pattern may push prices down toward gold’s long- term trend lines between $1,130 an ounce and $1,180, depending on the speed of the decline, Stellakis said.
“This suggests that gold should find a bottom over the next week,” said Stellakis, founder of New York-based research company Technical Alpha. “If gold cannot rally by then, lower prices might be needed to attract buyer interest.”
Gold traded at $1,197.35 an ounce at 9:36 a.m. in London and is down 1.2 percent this week. A third weekly drop would be the longest run of weekly losses since the beginning of February. The metal has fallen 5.4 percent since setting a record $1,265.30 on June 21.
The lows typically formed within five days before or after each expected trough, Stellakis said. The gains between consecutive lows have mostly returned about 5 percent, he said.
In technical analysis, investors and analysts study charts of trading patterns and prices to predict changes in a security, commodity, currency or index.
To contact the reporters on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net.
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