Gold Outlook Is Bearish Below August’s High: Technical Analysis

Gold’s outlook is bearish while prices stay below the August high and the metal may fall toward the 34-month low of $1,180.50 an ounce set in June, according to technical analysis by Commerzbank AG.

Bullion rose in three so-called corrective Elliott ABC Waves that probably ended with the three-month high of $1,433.83 on Aug. 28, the bank said in a report today. Targets lower include the $1,352 to $1,322 area consisting of a support line, the July high and April and May lows, and the 55-day moving average, the bank said. A drop below the August low at about $1,273 may push prices to the $1,200 to $1,100 area, it said.

“We will stick to our bearish view while gold trades below” August’s high, Axel Rudolph, a technical analyst at Commerzbank in London, said in the report. “While no daily chart close above this high is seen, we expect the gold price to fall back to and beyond this year’s” low by the end of 2013, or the beginning of next year, he said.

Prices are heading for the first annual drop in 13 years as some investors lost faith in the metal as a store of value and on speculation the Federal Reserve will curb stimulus. Gold for immediate delivery slipped 18 percent this year to $1,369.04 by 12:28 p.m. in London. While it rebounded from the 34-month low set June 28, it’s trading 29 percent below September 2011’s record price of $1,921.15.

In technical analysis, investors and analysts study charts of trading patterns and prices to predict changes in a security, commodity, currency or index. The Elliott Wave theory seeks to predict moves by dividing past trends into sections, or waves.

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