Gold Bear Market at $1,300 Signaled by Moving Averages: Technical Analysis

Gold prices, down 16 percent from a record in September, are headed into a bear market at $1,300 an ounce this year, according to technical analysis by Lance Roberts at Streettalk Advisors LLC.

The weekly moving-average convergence-divergence graph, a measure derived by subtracting a long-term trend from a shorter one, is indicating prices are likely to decline further, said Roberts, Streettalk’s chief executive officer. Since the end of September, an MACD chart using 26- and 12-week moving averages has been below a nine-week measure known as the signal line, and the gap has been widening.

“The sell signal remains strong, and so there is still some time before we see more buyers than sellers,” Roberts said in a telephone interview from Houston. “The trend is negative, so we have to be more cautious.”

On Dec. 29, gold futures on the Comex in New York settled 19 percent below their record close of $1,891.90 on Aug. 22, about 1 percentage point shy of the 20 percent needed for a bear market. After reaching a record $1,923.70 on Sept. 6, the price fell to $1,523.90 on Dec. 29, the lowest since July 7.

Roberts said bullion will decline to $1,300 this year, a drop of almost 20 percent from the Jan. 6 closing price of $1,616.80.

If the indicator line in an MACD chart falls below the signal line, it is pointing to lower prices, and if it crosses above the shorter-term moving average, the indication is bullish, Roberts 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 reporter on this story: Debarati Roy in New York at droy5@bloomberg.net

To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net

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