Gold bears say charts point down toward a 3-year low

Spot gold's sharp tumble on Wednesday sent a bearish signal to many technical analysts, suggesting that the precious metal may slide further toward three-year lows.

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Although gold was up for the week, the bears pointed to bullion's 2.65 percent slide on Wednesday off of an exact double top at its one-month high.

They said this indicated that impetus to push above the USD 1,347.69 per ounce high had run out. Despite the bearish consensus, at least one analyst held out hope that gold could rebound to the highs of early this year around USD 1,700 an ounce.

Bullion has gained more than 9 percent in three weeks. On Friday, spot gold fell 0.2 percent to USD 1,330.30 per ounce by 3:46 p.m. Traders said some profit taking was seen after a session high of USD 1,340.

But gold's failure to scale the USD 1,350 peak of June 20, a day when gold dropped almost 6 percent, brought the bearish forecasts out. Chartists said they see targets down to USD 1,295, USD 1,265 and possibly lows last seen three years ago.

"Near-term topping signals against the USD 1,350 area in gold point to a move back in range toward targets in the USD 1,260 area," Barclays technicians wrote in their daily Technical Research report.

Barclays analysts called the precious metal overbought at current levels and gave it a bearish rating late on Thursday.

Societe Generale technical analyst Stephanie Aymes noted on Friday that, "Gold hit the channel upper limit at USD 1,347 where it formed a daily key reversal."

Aymes was referring to gold's move up from the June 28 low at USD 1,180 an ounce, its lowest level in three years. She expects gold is therefore due for a correction down to its recent range between USD 1303 to USD 1,295 and USD 1,275 per ounce.

In late Friday dealings, gold was down 0.79 percent at USD 1,322.46 an ounce.

Both analysts projected that gold could slide in the next few months to the USD 1,100 to USD 1,150 range, an area where gold spent time in April 2010.

Not everyone was so bearish. Charles Baker, chief investment officer at Tidal Asset Management in Greenwich, Connecticut said he is convinced gold's bottom is in and called the June 28 low, "an overshoot to the downside."

A proprietary intermediate wave he uses turned positive on July 11, he said, moving up rapidly with gold prices and prompting him to look for the mid-May range top at USD 1,400 as the most likely next target.

All this week, Baker noted, gold has pushed above a down trending channel line developing since gold's historic 17.50 percent collapse in April.

Predicting that channel may be cracking, he said, "If so, gold would get back to the USD 1,400 area, at least before another sell off. You could see a big hit just above USD 1,400 and then eventually break out to the upside."

If the upper channel line does give way, Baker looks for a rise to levels from early this year at USD 1,700 or higher.

"I'm on this wave until it turns and right now the intermediate wave is heading up," Baker said.