Gold Price At Four-Month Lows; Analysts See Room For More Pain

New York (Dec 5)  Gold prices have finally broken from their tightest trading range in more than a decade, and unfortunately for gold bulls, the break has been on the downside and now analysts see further downside in the near term.

For more than a month, market participants have been watching the October low at $1,267 an ounce, as this was seen as key near-term technical-chart support for the yellow metal. That support level has now broken as prices push to four-month lows. The question now becomes: just how low gold can go in the near term?

February gold futures last traded at $1,264.30 an ounce, down 1% on the day.

Bill Baruch, president of Blue Line Futures, said that while he sees some support at $1,262 an ounce, the reality is that the market is setting up to push lower in the near term.

“There is no catalyst to send gold prices higher,” he said. “I think we need to see a cleansing in the market that will set up for a buying opportunity for the end of the month.”

Baruch added that if $1,262 breaks, then that opens the door to test support at $1,250 an ounce.

Darin Newsom, senior analyst at DTN, in a recent interview with Kitco News, said that he could see prices falling all the way to $1,243 an ounce in the near term, and a break of that level could lead to a test of $1,215 an ounce. He noted that this selling pressure represents the third wave of a three-wave downtrend.

Newsom added that he also sees potential for higher prices following this correction and any dip might be seen as a positive buying opportunity.

“Sometimes you need a good washout and maybe we will see some buyers at lower levels,” he said.

Philip Streible, senior analyst at RJO Futures, said that he could see gold falling to $1,250 an ounce as markets prepare for the December Federal Reserve monetary policy meeting. He added that he doesn’t see any material rally in gold until after the meeting.

But it’s also not just gold that is feeling the pain Tuesday. Streible noted that silver is also being dragged lower, which is skewing the gold-silver ratio at 78.73, which according to Kitco.com is highest level in a year.

March silver futures are currently trading at their lowest level since mid-July, last trading at $16.10 an ounce, down nearly 2% on the day.

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