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Gold seen going back to boring by chart watchers at Commerzbank
[LONDON] After a relentless stretch of losses, gold is due for a pause, according to Commerzbank AG.
Gold futures are near a five-year low after falling almost every day this month, reaching technical levels in Fibonacci analysis that may support prices for a few weeks, Commerzbank said. A separate indicator showed bullion dropped to a point that, in 2013, sparked gains, data compiled by Bloomberg show.
"I suspect the market selloff has ended for now," Karen Jones, an analyst at Commerzbank in London, said by phone Tuesday. "You need to get out of your shorts. I don't have enough to say this is a reversal and to go out and buy it."
For most of this year, gold traded with little fluctuation as demand for a safe haven was offset by the strengthening dollar. Gold broke out of the range as data on Friday showed China has been buying less metal than expected and investors speculated the Federal Reserve will raise interest rates soon.
Gold lost 1 per cent to US$1,092.80 an ounce by 8:43 am London time on the Comex in New York. Prices fell a 10th day in the longest run since 1996 and are down 7.7 per cent this year.
Banks including Goldman Sachs Group Inc and Societe Generale SA are still bearish, while options traders were betting on more declines. Speculators have boosted short positions, or bearish bets, to the highest in at least nine years, US government data show.
In technical analysis, investors and analysts study charts of trading patterns and prices to predict changes in an asset or security. While gold may drop to about US$1,000, it will probably trade between US$1,050 and US$1,130 within the next few weeks, Ms Jones said.
Gold retreated to about US$1,087 on Monday in London, a 50 per cent retracement of its advance from 1999 to 2011. That's a level used in Fibonacci, a system that takes figures found in nature to predict future moves. The level, and a 40-year so- called pivot line, should support the metal, she said.
Spot gold's 14-day relative-strength index settled at 17.3 on Monday, the lowest since April 2013. Levels under 30 indicate a rebound to some analysts. The last time the index was that low, prices rallied 9.5 per cent in two weeks.
"We should see at least some hold down here," said Ms Jones of Commerzbank. "What I expect will happen is that we will have a period of consolidation."