Gold may extend its 19 percent slump since January as prices on charts form a “head and shoulder” pattern that signals more selling, according to Credit Suisse Group AG.
Bullion fell below $1,360 an ounce, a support level from the upward trend that began in late June, David Sneddon and Christopher Hine, technical analysts at the bank, said in a report yesterday. The drop may lead to the formation of a small head-and-shoulder top, they wrote. The pattern comprises three consecutive peaks on a chart, with the middle being the highest.
Prices may slip further to test $1,337, the 38.2 percent retracement of the June-August rally on Fibonacci analysis, according to the report. A fall below the level “should add weight to the scenario” that a broader bear trend is resuming, taking the metal lower to $1,270, they wrote.
Gold tumbled into a bear market in April on concern that the Federal Reserve would pare stimulus as the economy improved. Metal for immediate delivery dropped 0.6 percent to $1,357.45 an ounce at 2:53 p.m. in Beijing.
In technical analysis, investors and analysts use charts of trading patterns and prices to predict changes. Fibonacci studies are based on the theory that prices rise or fall by certain percentages after reaching a high or low.
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