Gold, the worst-performing precious metal this year, may drop below $1,600 an ounce in the next couple of weeks after breaking a key support level, according to technical analysis by Commerzbank AG.
Bullion for immediate delivery has fallen below the 2012- 2013 support line of $1,641.83 and will then test the January low of $1,625.85, Karen Jones and Axel Rudolph wrote in a weekly report dated Feb. 13.
“The $1,625.85 level remains key for the medium-term trend,” they wrote. “Failure here should provoke a sell-off to below $1,600 level before the precious metal levels out and starts rising again.”
On a weekly basis, gold has fallen through the 2008-2013 uptrend line at $1,651.66 and may head down toward the $1,600 level, they said.
Gold has slipped 2.4 percent this year, underperforming an 11 percent gain in platinum, an 8.3 percent climb in palladium and a 0.2 percent rise in silver. Gold traded at $1,634.60 an ounce at 8:13 a.m. in Seoul.
In technical analysis, investors and analysts study charts of trading patterns and prices to predict changes in a security, commodity, currency or index. A support level indicates a price at which buy orders may accumulate when a security is falling.
Elsewhere, the signs don't look for the precious metal. Indeed, gold traders are the most bearish in more than a year on mounting speculation that improving economic growth from the U.S. to China will curb demand for this year's worst-performing precious metal.
Twenty analysts surveyed by Bloomberg this week expect prices to fall next week, while 11 were bullish and three were neutral, making the proportion of bears the highest since Dec. 30, 2011. Hedge funds cut bets on higher prices by 56 percent since October and are approaching their least bullish stance on gold since August, government data show. The metal fell to a five-month low today, and billionaire investors George Soros and Louis Moore Bacon reported yesterday that they had reduced stakes in exchange-traded products backed by gold.
First-time jobless claims in the U.S. decreased more than estimated last week, while a Chinese government-backed survey showed manufacturing expanded in January. Growth will accelerate in the world's two largest economies in coming quarters, according to more than 100 economists surveyed by Bloomberg. Investors cut record bullion holdings in exchange-traded products this year and added to funds backed by other precious metals that are used more in industry.
“The global economic recovery is on track,” said Andrey Kryuchenkov, a commodity strategist in London at VTB Capital, a unit of Russia's second-largest lender. “The persistently decent macro data is denying gold its usual safe-haven properties. You can get better returns elsewhere.”
Gold prices that rallied the past 12 years will probably peak in 2013, or already have, according to Goldman Sachs Group Inc. and Credit Suisse Group AG.
The metal fell 4.4 percent to $1,602.90 an ounce in New York this year, and reached $1,596.70 today, the lowest since Aug. 15. Gold climbed 7.1 percent last year in the longest annual rally in at least nine decades. The Standard & Poor's GSCI gauge of 24 commodities is up 4.2 percent this year and the MSCI All-Country World Index of equities gained 4.7 percent. Treasuries lost 0.9 percent, a Bank of America Corp. index shows.
Gold's drop compares with a 1.2 percent loss for silver this year. Platinum and palladium rose at least 6.8 percent on concern mine supply will fall as demand increases. An ounce of platinum bought as much as 1.054 ounces of gold yesterday, the most in 17 months, data compiled by Bloomberg show. Industrial usage accounts for about 10 percent of bullion consumption, compared with more than half for the other three metals.
Gold ETP assets reached a record 2,632.5 metric tons on Dec. 20 as policy makers from the Federal Reserve to the Bank of Japan pledged more action to stimulate growth. Holdings are down 0.9 percent this year, while silver products rose 3 percent, platinum 9.9 percent and palladium 13 percent, data compiled by Bloomberg show.
Soros Fund Management reduced its investment in the SPDR Gold Trust, the biggest fund backed by the metal, by 55 percent to 600,000 shares as of Dec. 31 from three months earlier, a U.S. Securities and Exchange Commission filing showed yesterday. Bacon's Moore Capital Management LP sold its entire stake in the SPDR fund and lowered holdings in the Sprott Physical Gold Trust. Paulson & Co., the largest investor in SPDR, kept its stake at 21.8 million shares, a filing showed.
Bullion is unlikely to return to its September 2011 high of $1,921.15 because of accelerating U.S. growth and contained inflation, Credit Suisse said in a Feb. 1 report. Goldman forecast in a Jan. 18 report that gold will climb to $1,825 in three months and peak this year.
U.S. economic growth will accelerate every quarter this year to a median 2.7 percent in the final three months, according to 87 estimates compiled by Bloomberg. China's expansion will pick up to a median 8.3 percent in the third quarter from 8.1 percent in the first, according to 34 estimates compiled by Bloomberg.
Even as the recession in Europe deepened more than economists forecast last quarter and Japan's economy shrank, the International Monetary Fund predicts global growth will climb to 3.5 percent this year from 3.2 percent in 2012.
“There's a lack of imminent financial disasters at the moment,” said John Meyer, an analyst at SP Angel Corporate Finance LLP, a broker and adviser in London. “Investors are going for a more risk-on approach and that tends to lead them away from gold.”