Gold ‘Death Cross’ Signals Slump to $1,200: Technical Analysis

Gold futures may extend a slump and drop to $1,200 an ounce, the lowest since June, as moving averages signal a “death cross” according to technical analysis by by Logic Advisors.

The 50-day moving average has fallen below the 100-day average for two straight sessions, signaling futures on the Comex in New York may fall as much as 5.7 percent from yesterday’s settlement of $1,272.30 by the end of the year, said Bill O’Neill, a parter at Logic Advisors in Upper Saddle River, New Jersey.

Gold is heading for the first annual loss since 2000 after some investors lost faith in the metal as a store of value. Global equities advanced to the highest in almost six years yesterday, and U.S. inflation is running at 1.2 percent, half the rate of the past decade. Federal Reserve Bank of New York President William C. Dudley said yesterday he’s “getting more hopeful” the U.S. economy is gaining strength, fueling concern the central bank will cut its monetary stimulus.

“The market looks very anemic, and the technicals point towards more weakness,” O’Neill said in a telephone interview. “The death cross is another indication that prices will remain under pressure.”

The death cross forms as a short-term moving average falls below a long-term measure. Yesterday, the 50-day average was $1,315.58, and the 100-day measure was $1,319.97. The first bearish target is $1,250, and the next is $1,200, O’Neill said. On June 28, prices touched $1,179.40, a 34-month low.

Speculators cut their net-long position in gold by 37 percent to 55,456 futures and options in the week ended Nov. 12, U.S. Commodity Futures Trading Commission data show, the biggest drop since February. Short bets climbed to 54,143, the highest since mid-August, from 26,490 a week earlier.

Global bullion demand tumbled 21 percent last quarter as investors pulled 118.7 metric tons out of exchange-traded funds and similar products, World Gold Council data show.

In technical analysis, investors and analysts study charts of trading patterns and prices to predict changes.

To contact the reporter on this story: Debarati Roy in New York at droy5@bloomberg.net

To contact the editor responsible for this story: Millie Munshi at mmunshi@bloomberg.net

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