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Gold May Fall to $1,127, Extending Drop, Barclays Says: Technical Analysis
Gold may decline to $1,127 an ounce in the next several weeks after falling below a so-called trend line, according to technical analysis by Barclays Capital.
The attached chart shows the metal slid below its 100-day moving average and yesterday dropped below a 21-month trend line. The second chart shows prices may fall to the 200-day moving average of about $1,148 and then to $1,127, according to Barclays. The latter price would be a 23.6 percent retracement of the metal’s rally from October 2008 to June this year, one of the levels singled out in so-called Fibonacci analysis.
“The trend-line break is forcing a lot of people out of their positions,” MacNeil Curry, an analyst at Barclays, said in an interview from New York. “People being washed out of their positions may open up an opportunity for a stronger base and subsequent move higher.”
Gold fell 8 percent since reaching a record $1,265.30 on June 21 as investors reduced their holdings in the SPDR Gold Trust, the biggest exchange-traded fund backed by bullion, for three consecutive weeks, data compiled by Bloomberg show. Speculators including hedge funds cut their net-long position, or bets prices will rise, in New York gold futures by 13 percent, according to U.S. Commodity Futures Trading Commission data for the week ended July 20.
Gold traded at $1,162.50 at 7:05 a.m. in London.
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 tend to drop or climb by certain percentages after reaching a high or low.
To contact the reporters on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net.
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