Gold may resume a slump following the July rally of 7.3 percent, the most in 18 months, said Louise Yamada, the managing director of Technical Research Advisors LLC, citing momentum and moving-average signals.
The parabolic stop-and-reverse system and a death-cross formation, with the 10-month moving average below the 20-month measure, remain intact after the rally, said Yamada, the former head of technical research at Citigroup Inc. Gold may approach the 34-month low of $1,179.40 an ounce reached on June 28, the New York-based analyst said. The metal entered a bear market on April 12, falling more than 20 percent from the record settlement of $1,891.90 in August 2011.
“It will need a lot of repair to come out of this bear market,” Yamada said in a telephone interview. “The recovery that we have seen is fragile, and monthly momentum is in steep decline.”
In 2013, gold has dropped 23 percent on the Comex in New York following 12 straight annual gains. Some investors lost faith in the metal as a store of value amid a U.S. equity rally and low inflation.
The parabolic stop-and-reverse system measures price momentum and gauges a higher-than-normal probability of a change in direction. The 20-month moving average was $1,583, and the 10-month measure was $1,491.
In technical analysis, investors and analysts use charts trading patterns and prices to predict changes.