Gold Futures May Drop to Lowest Since 2010: Technical Analysis

Gold futures may decline to a three-year low if the price breaches the April 16 low by the end of June, extending a bear market that started last month, according to technical analysis by research company JSC Corp.

The most-active contract on the Comex in New York fell below the so-called cloud on Ichimoku charts and traded below the 50-day moving average since February, said Takaki Shigemoto, an analyst at the Tokyo-based company. If futures retreat below $1,321.50 an ounce in coming weeks, they will then drop to $1,155.80, reached in April 2010, he said.

Gold has dropped 17 percent this year in New York after climbing in the previous 12 years. Futures plunged into a bear market as some investors lost faith in the metal as a store of value amid economic optimism, low inflation and a rally in equities. The drop will be intensified if the Federal Reserve begins scaling back monetary stimulus later this year, he said. Bullion for August delivery rose 0.2 percent to $1,389.90 at 4:19 p.m. in Tokyo.

In technical analysis, investors and analysts study charts of trading patterns and prices to predict changes in a security, commodity, currency or index. The Ichimoku chart analyzes midpoints of historic highs and lows, or so-called resistance and support levels, with a breakout from above or below the cloud pointing to a trend.

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