Gold futures may extend a slump to as low as $1,538 an ounce, the cheapest since May, as moving averages signal a “death cross,” according to technical analysis by Fain Shaffer of Infinity Trading.
The metal may drop as much as 4.4 percent from the Feb. 15 settlement of $1.609.50 on the Comex in New York if the 50-day moving average falls below the 200-day measure, Shaffer said. Last week, the price tumbled 3.4 percent, the most since June, after government filings showed billionaire investor George Soros cut his stake in exchange-traded products backed by gold in the fourth quarter,
“The trend and the mood has turned negative,” Shaffer, the president of Medford, Oregon-based Infinity, said in a telephone interview. “Selling may gather momentum if prices fall below the cross.”
The death cross forms as a short-term moving average falls below a long-term measure. On Feb. 15, the 50-day average was $1,672, and the 200-day measure was $1,665. The first bearish target is $1,550, and the next is $1,538, Shaffer said. He didn’t give a time frame for the slump.
Soros Fund Management LLC 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 on Feb. 14.
Twenty analysts surveyed by Bloomberg last week expect gold to fall this week, while 11 were bullish and three were neutral, making the proportion of bears the highest since Dec. 30, 2011.
On Feb. 18, gold futures for April delivery touched $1,596.70, the lowest for a most-active contract since Aug. 15. After the moving averages last formed the death cross in April, the metal fell about 6 percent in a month.
In technical analysis, investors and analysts study charts of trading patterns and prices to predict changes.
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