Gold might extend a decline after failing to breach the so-called resistance at $977.41 an ounce, Standard Chartered Bank said, citing trading patterns and forecasting that the metal may drop to less than $900.
The resistance level represents a 76.4 per cent retracement of the metal's drop from the near-record high of $1,032 an ounce to the low of $883.90 on March 18, said David Barclay, the bank's commodity strategist, referring to a number that is part of the Fibonacci sequence.
"Spot gold is expected to trade lower over the near term, as a potential top continues to unfold," London-based Barclay wrote in a report dated yesterday. There is "a sell signal in place for now," he said. Resistance refers to a level where sell orders may be clustered. Technical analysis is founded on the belief that past trading patterns can be used to predict future moves. Fibonacci analysis uses a mathematical formula based on the theory that prices may rise or fall by certain percentages after reaching a high or low. A break of one indicates an asset may move to the next, while a failure suggests a trend may stall. Other Fibonacci points include 61.8 per cent.
Gold for immediate delivery fell as much as 0.4 per cent to $930.66 an ounce, and was at $933 at 12:09 pm in Singapore. The metal last traded at less than $900 an ounce on March 18, when it dropped to as low as $883.90.
"The one-month view for spot gold continues to favour a breakdown below $900, which should allow for a test of $865 to $860 and lower," Barclay wrote.
