Gold May Tumble to $1,535 on 200-Day Average: Technical Analysis

Gold, down 7.1 percent from the 2012 high in October, may extend its losses through next quarter, according to technical analysis by Stifel Nicolaus & Co.

The price may drop to $1,535 an ounce if it closes below the 200-day moving average, said Dave Lutz, the head of exchange-traded fund trading and strategy at Stifel Nicolaus in Baltimore. Futures for February delivery were little changed at $1,670.10 at 12:51 p.m. on the Comex in New York, after falling as much as 0.3 percent to $1,665.10. The 200-day moving average is about $1,669.

Gold is facing “headwinds” amid low inflation and the prospect for a budget agreement in Congress, Lutz said. If lawmakers are able to avoid the more than $600 billion in tax increases and spending cuts set to begin in January, it would remove an obstacle to economic growth and reduce demand for precious metals as a haven, he said.

“Low inflation and low-to-medium growth are going to be a negatives for gold,” Lutz said in a telephone interview. “Businesses are holding back on spending, but as soon as we get the budget stuff out of the way, 2013 could certainly be a good year for growth” in the economy, he said.

The “first stop” for gold will be $1,600, followed by a drop to $1,535 by the end of the first quarter, Lutz said, basing his forecast on the price move when futures fell below the moving average in March.

To contact the reporter on this story: Joe Richter in New York at jrichter1@bloomberg.net

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

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