Technicals | Jul 12 2010
By Rudi Filapek-Vandyck
It has become a popular exercise for quant and technical analysts across the globe: looking back to see whether patterns and similarities in calendar 2009 can provide investors with any clues about the way forward for financial assets in the second half of 2010.
Technical market analysts at Barclays Capital have long held a positive view on gold, and they stick to that view. Shorter term, however, they believe gold is likely to continue its recent struggle. Comparisons with last year have further reinforced this view.
Despite Friday's recovery, gold remains below its 50-day moving average -presently at US$1218/oz- and this, say the analysts, is ultimately a bearish development. They see a similarity in gold's trading behaviour around this time last year.
On the basis of what happened in June-Ju;y 2009, Barclays analysts foresee more weakness, but also a bottom soon, probably before the end of this month.
Last year, the analysts note, the gold price bottomed around… now. Though this year's trading in June and July seems to share a lot of characteristics with what happened in 2009, the analysts maintain there's more weakness to be expected in the short term, still.
As such, they believe gold will put support at US$1181/oz to a real test in the sessions ahead. In case this level cannot withstand selling pressure, gold should target US$1155/65/oz next. Adding to this view is the fact that market momentum indicators have fallen to rather low levels recently.
Using the June/July 2009 correction as a blueprint, the analysts argue gold is probably looking at revisiting US$1163/53, which equals the October 2008/February 2010 trendline. After that, solid market support is expected to kick in.
Barclays technical analysts remain of the view that later this year the larger bull trend will re-establish itself with gold expected to target US$1350 at first, but ultimately US$1500/oz before we move into 2011.
