Gold Priced in Euros Is `Forming a Top,' Jones Says: Technical Analysis

Gold in euros may have peaked after the metal declined to less than the 55-day moving average for the first time in a year, according to a report from Commerzbank AG’s technical analyst Karen Jones.

Gold denominated in the single currency reached a record 1,050.88 euros an ounce on June 8 as investor concerns about Europe’s sovereign debt levels boosted the metal’s allure and drove the 16-nation currency lower, Jones wrote in a report. The breach of the moving average at 975 suggests “the market is forming a top,” Jones wrote. The metal was at 950 euros today.

Rising government debt burdens in European nations including Greece stoked speculation earlier this year that there may be a breakup of the euro region. The gold market in Europe “has just taken off” amid the crisis, Australia’s Perth Mint said last month.

“The gold price in euros is now expected to trade below the psychological 1,000 mark for many weeks,” London-based Jones wrote. “In fact, near-term rallies are now likely to find that the 975-to-1,000 zone acts as short-term resistance.”

Commerzbank remained bullish on gold in the medium term as long as the price in euros remained at more than the May 21 low of 935.21 an ounce, Jones said, without defining the timeframe precisely. A slide to 933 euros an ounce may prompt a further decline to 900 euros “pretty rapidly,” she wrote.

In technical analysis, investors and analysts study charts of trading patterns and prices to try to forecast changes in a security, commodity, currency or index. A resistance level is marked by a cluster of sell orders.

To contact the reporter on this story: Kyoungwha Kim in Singapore at Kkim19@bloomberg.net

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