Gold May Break Out to Record, Grabham Says: Technical Analysis

By Glenys Sim

Sept. 1 (Bloomberg) — Gold may advance to a record $1,325
an ounce if it first breaks out of a symmetrical, triangular
pattern, a move that may occur in the next one or two weeks,
Standard Bank Group Ltd. said, citing trading patterns.

A so-called topside breakout would be indicated by a close
at more than $980.85 an ounce, Darran Grabham, the bank’s
technical analyst, wrote in a note yesterday. That would signal
a short-term bull trend to at least $1,100 an ounce, he said.
Gold traded today at $952.80.

In addition to the triangular pattern, gold rising to more
than this year’s peak of $1,006.29 would “confirm the
completion of a continuation head-and-shoulders pattern — the
eventual target is $1,325,” Grabham wrote. The precious metal’s
record stands at $1,032.70, touched on March 17, 2008.

A head-and-shoulders pattern is formed when a commodity
makes three consecutive peaks, with the middle being the highest.
It forms during a series of increases over time, according to
technical analysts, who say that past moves of an asset may be
used to predict future trends.

Symmetrical triangle patterns are unpredictable, and gold
may tumble if it declines to less than the support trendline at
$935 an ounce, Grabham wrote. “The ensuing sell-off is likely
to encounter support around the $906.50 level, before a break
lower yields a move to a secondary objective of $890,” he added.

“The minimum target of the triangle is highlighted at $850,
with potential for the bear trend to test the corrective low
recorded in January,” he wrote. Gold traded as low as $802.59
that month.

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