Tags: gold | bear | market | prices

UBS Analysis: Gold Price Seen Falling to $1,303

Monday, 10 Jun 2013 08:42 AM

 

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Gold’s recovery to a three-week high last week is over and prices that entered a bear market in April may fall another 5.5 percent to about $1,303 an ounce, according to technical analysis by UBS AG.

The $1,303 level would be the 50 percent retracement of bullion’s rally from October 2008 to its record in 2011, one of the levels singled out in so-called Fibonacci analysis.

A “cross lower” in Stochastic momentum indicators would be a bearish signal, UBS said in a report June 7, when prices dropped the most in three weeks.

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“This would suggest the recent recovery is over,” Richard Adcock, a technical strategist at UBS in London, wrote in the report. “The next leg of the bear trend is to be seen down to the long-term 50 percent retracement point at $1,303, which we would set as our objective.”

Gold slid 18 percent this year as an improving U.S. economy increased speculation the Federal Reserve may scale back quantitative-easing measures that helped bullion cap a 12-year bull run in 2012.

Prices are now 28 percent below the $1,921.15 record set in September 2011 and investors are holding the least metal through exchange-traded products in more than two years.

Bullion for immediate delivery traded at $1,379.32 by 11:17 a.m. in London, after dropping 2.2 percent on June 7. It had reached $1,423.90 the day before, the highest since May 15. If gold were to fall below $1,350, there may be “nothing” to support prices between there and the $1,200 to $1,225 area, economist Dennis Gartman wrote in his daily report.

In technical analysis, investors and analysts study charts of trading patterns and prices to predict changes in a security, commodity, currency or index.

Fibonacci analysis is based on the theory that prices rise or fall by certain percentages after reaching a high or low. Stochastics, technical analysis tools based on momentum measures, are often used to identify whether a security’s price is overbought or oversold.

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