Individuals who want to make money by trading gold might benefit from knowing about recent technical analysis, which has predicted that futures for the precious metal could plunge to $1,200 per ounce by the end of this year.
This forecast was made after the commodity fell into a bear market in April and then managed to extend these losses over the next few months, dropping to less than $1,200 per ounce in June. As a result of these price movements, gold moved to its lowest price in almost three years.
The precious metal managed to enjoy some appreciation after dropping to this recent low, and moved into a bull market in August. In spite of this recent recovery, gold is still down sharply for the year.
Technical analysis predicts further losses
In addition to this depreciation, technical analysis provided by Logic Advisors predicted that the precious metal could depreciate further this year, according to Bloomberg. Bill O’Neill, who is a partner at the firm, stated that since the 50-day moving average for gold futures has declined below the 100-day average during two sessions in a row, a “death cross” has happened. The “death cross” that was described by the partner at Logic Advisors happens when a short-term moving average drops below a long-term measure.
This pattern was created because the 50-day moving average of $1,315.58 an ounce fell below the 100-day measure of $1,319.97 per ounce, the media outlet reported. As a result of this happening, these contracts could drop to as little as $1,200 per ounce before 2013 is over. Falling to this level would result in the precious metal suffering a 5.7 percent drop from the closing value of $1,272.30 per ounce that gold had on Nov. 17. As a result of these developments, the first bearish target of gold futures is $1,250 an ounce. After that, the next key level resides at $1,200 per ounce.
Many factors bearish for gold
Various factors have been pointing to a future for gold that is far from stellar. For example, the demand for the precious metal plunged by more than 20 percent in the third quarter of 2013 when compared to the same period in 2012, according to data provided by the World Gold Council.
In addition, there are concerns that many market experts have lost their faith in the precious metal as a store of value. One example that might point to certain individuals feeling more pessimistic about gold than they did before is the decision that many hedge fund managers made earlier this year to reduce their stake in the metal, CNN Money reported.
John Paulson, who is notorious for being a gold bull, cut his ownership in the SPDR Gold Trust exchange-traded fund earlier this year, according to the news source. In the second quarter, he lowered his stake by more than half. His firm emailed a statement indicating that it had made this move “due to a reduced need for hedging.”
Sustained QE could provide boost
However, amid all these different factors that could easily point to the precious metal moving lower in value, gold could receive upward pressure if the Federal Reserve continues its existing regimen of making bond purchases for some time.
Such a scenario has started to look increasingly likely, as Fed chair nominee Janet Yellen, who may succeed Ben Bernanke in the top post at the central bank, is known for her dovish stance on asset purchases. Market experts have become more hopeful that these transactions will go on at their current pace for some time, as a result of the partial shutdown that the U.S. federal government experience last month.
Individuals who want to make money by trading gold can leverage this information to get a better sense of where gold prices will go in the future.
The post Gold’s 2013 Loss could be Extended as Metal Falls to $1,200, Says Technical Analysis appeared first on | HY Markets Official blog.
Article provided by HY Markets Forex Blog
