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Gold May Stall Near Record on Bollinger Band: Technical Analysis

Gold may stall below a record after the metal rallied to near the higher of two Bollinger bands,
according to technical analysis by VTB Capital. Photographer: Eliot J. Schechter/Bloomberg
Gold may stall below a record after the metal rallied to near the higher of two Bollinger bands, according to technical analysis by VTB Capital. Photographer: Eliot J. Schechter/Bloomberg

Dec. 31 (Bloomberg) -- Gold may stall below a record after the metal rallied to near the higher of two Bollinger bands, according to technical analysis by VTB Capital.

The attached chart shows bullion this week climbed above a resistance level of about $1,390 an ounce, which had capped prices the previous eight days. Still, the rally may halt near $1,423.50 for “a week or so” as the upper Bollinger band provides resistance and as the metal’s relative-strength index rises, VTB Capital analyst Andrey Kryuchenkov said.

“We have good momentum at the moment but oscillators already start pointing at overbought levels,” London-based Kryuchenkov said. “It is unlikely we will breach record highs at just one go. As it happened in October, November and December, Bollinger bands will also serve as good short-term resistance.”

Gold climbed to a record $1,431.25 on Dec. 7 and is heading for a 10th consecutive annual gain on demand for a protection of wealth and an alternative to currencies. Prices are up 28 percent this year, outperforming the MSCI World Index of equities and U.S. Treasuries, and were at $1,406.03 at 4:07 p.m. in London yesterday.

The metal’s 14-day RSI, a gauge of whether a commodity is overbought or oversold, was at 62.4 yesterday, the highest level in more than three weeks. Some analysts view a level of 70 as a sign that prices may be poised to drop.

In technical analysis, investors and analysts study charts of trading patterns and prices to predict changes in a security, commodity, currency or index. Bollinger bands, developed by analyst John Bollinger, are based on historical price swings. The bands narrow and widen to reflect the size of those moves, and represent possible support and resistance levels.

To contact the reporter on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net.

To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net.

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