Bloomberg News

Gold May Extend Decline, Commerzbank Says: Technical Analysis

June 16, 2011

June 16 (Bloomberg) -- Gold prices will likely drop further on so-called seasonality after reaching a record in May, according to technical analysis by Commerzbank AG.

“We will hold onto this bearish outlook as long as the current June high of $1,554.10 isn’t being exceeded on a daily closing basis,” analyst Karen Jones said in a report yesterday. “Otherwise we will most likely be proved wrong with the May all-time high around $1,577 then being back in the picture.”

Gold climbed to a record $1,577.57 an ounce on May 2 and advanced 7.4 percent this year as investors sought protection against sovereign-debt turmoil in Europe and accelerating global inflation. The European Central Bank said yesterday the threat of the Greek debt crisis spilling over into the banking sector was the biggest risk to financial stability. Bullion traded at $1,526.25 an ounce at 12:47 p.m. in Tokyo.

“For now we expect the 2011 uptrend line at $1,515 to be breached,” Jones said. This view is reinforced by seasonality, which points to a decline in prices in the first half of June and during July, Commerzbank analyst Axel Rudolph said in a note on June 14.

The bank puts support between $1,513.90 and $1,501.70 and then as low as $1,442.70, the 50 percent retracement of the 2011 advance, according to Jones. A support level is an area where analysts anticipate buy orders.

In technical analysis, investors and analysts study charts of trading patterns and prices to predict changes in a security, commodity, currency or index. Some analysts and traders use a combination of indicators and levels to form both short- and long-term forecasts.

--Editors: Jarrett Banks, James Poole

To contact the reporter on this story: Jae Hur in Tokyo at

To contact the editor responsible for this story: James Poole at

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