Gold to Extend Decline, Credit Suisse Says: Technical Analysis

Feb. 20 (Bloomberg) -- Gold prices may fall as much as 5.1 percent to a 13-month low, according to technical analysis by Credit Suisse AG.

Fibonacci ratios suggest the spot price of the metal may drop as low as $1,523 an ounce from yesterday’s settlement of $1,605.05, the lowest since Aug. 15, Pamela McCloskey, a technical analyst at Credit Suisse in London, said yesterday in a telephone interview. Gold failed to stay above the 23.6 percent retracement level from the all-time high of $1.921.15, indicating another slump, she said.

“The lower highs and the lower lows have formed a staircase formation, and prices are climbing down,” McCloskey said without giving a time frame for the decline. “Gold looks weak on the charts.”

Earlier today, the spot market touched $1,578.25, the lowest since July 25. Gold may fall to $1,523 to $1,532, McCloskey said, and the bottom of the range would mark the cheapest since Dec. 29, 2011. Through yesterday, the price slumped 7.5 percent in the past 12 months, partly as signs of economic recoveries in the U.S. and China eroded demand for the metal as a haven.

The 50-day moving average of $1,663.34, based on yesterday’s spot settlement, fell below the 200-day average of $1,665.97, forming a “death cross,” another bearish technical indicator. On Feb. 17, Fain Shaffer, the president of Infinity Trading in Medford, Oregon, said the cross in the New York futures market means the price may drop as low as $1,538.

In technical analysis, investors and analysts use charts of trading patterns and prices to predict changes. Fibonacci studies are based on the theory that prices rise or fall by certain percentages after reaching a high or low.

--Editors: Patrick McKiernan, Thomas Galatola