Gold futures may slump to $1,600 an ounce by the end of the year, according to technical analysis by Paul Kavanaugh at FuturePath Trading LLC.
The contract for December delivery settled below its 50-day moving average for the second straight day, signaling the metal may slide 6 percent from yesterday’s closing price of $1,701.60 on the Comex in New York, Kavanaugh, the Chicago-based director of business development, said in a telephone interview.
“The downside risks are growing, and prices have peaked for this year,” said Kavanaugh, who correctly predicted in early April that the Standard & Poor’s GSCI Spot Index of 24 raw materials would slump by the end of the second quarter. “Gold will correct further.”
Yesterday, the metal touched $1,698.70, breaching $1,700 for the first time since Sept. 7. The 50-day moving average is $1,726.55. In October, gold has declined 4.1 percent, heading for the first drop since May.
The price has advanced 8.6 percent this year, heading for the 12 straight annual gain, as economic stimulus by the U.S., Europe and Japan spurred demand for the metal as an inflation hedge. This month, gold has averaged $1,755.28, the highest since September 2011, when the commodity surged to an intraday record of $1,923.70.
This year’s high was $1,798.10 on Oct. 5.
In technical analysis, investors and analysts study charts of trading patterns and prices to predict changes in a security, commodity, currency or index.
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