Gold may be on course to test $1,055 per ounce this year after breaching key support levels on moving average charts, according to technical analysis by Galaxy Futures Co.
Moving average lines on monthly charts show bullion is headed toward the support level after breaching $1,418, said Jiang Hongyan, a Beijing-based analyst at the brokerage. The metal is currently oversold and this may hold it around $1,200 before it drops again, she said.
“The Moving average convergence-divergence indicator shows that sentiment is very bearish at the moment, so we may see this happen in the next six months,” Jiang said. “There seems to be no momentum for a bounce.”
Gold for immediate delivery rose 0.6 percent to $1,241.43 an ounce at 10:53 a.m. in Shanghai after falling 23 percent in the second quarter, the worst since at least 1920, according to data compiled by Bloomberg. The precious metal is poised for the biggest yearly drop in more than three decades after rising for 12 years in a row.
Technical analysts observe price charts to forecast resistance levels, or ceilings restricting price increases and support levels limiting declines. The trading patterns and prices are used to predict changes in a security, commodity, currency or index. The moving average convergence-divergence helps to gauge momentum.
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