London: Gold's recent rally to six month highs may spark a further jump to levels last seen in the second half of 2013. Technical analysts have specified 'Fresh highs could be followed by a slide back to three-year lows.'
Bullion is currently on track for its biggest quarterly rise since 2007, after prices hit a six-month high last week from a break of key resistance at $1,361.60 an ounce.
That has opened the way for a return to the highs seen in August at $1,433 an ounce, according to analysts who look at past price movements to gauge the next likely direction of trade. This infact can mark a turning point for gold.
"We are targeting the $1,400 area, then $1,424-1,434, which are the highs from June of last year and August," said Axel Rudolph, Commerzbank analyst
"From a longer term perspective, looking at the end of 2014 and 2015, we could have a break below last year's lows. We could go to $1,100-1,150. This is part of a large corrective move, and we're getting towards the top of that range" added Rudolph, referring to the near three-year low of $1,180.71 gold hit in June.
Murray Gunn, Head of technical analysis at HSBC, suggested that there is scope for marginal new highs from here, before a drop back towards the $1,000-an-ounce level.
Gold prices crashed dramatically last year after breaking below long-term support at $1,525 an ounce. Prices dropped more than $200 an ounce in less than three days after that level gave way, and ended the year down 28 per cent.
Analysts also said, 'Gold's 14-day relative strength indicator (RSI) remains just below the 70 level that would indicate overbought conditions, at 69.4, and other indicators are not yet looking overstretched.' In the near term, the $1,400 level is expected to offer some near-term resistance, though this round number will be largely psychological.
"We are seeing higher highs and lower lows, and we're technically in a bull trend," added Lynnden Branigan, a technical analyst at Barclays Capital."At around 1,400 people might be looking to take a little bit of money off the table, but overall, I think we have room to test the highs of last August, so we're looking at a target in the $1,434 area."
