Gold Price Decline Is Part of a Down Trend, Affected by Rising U.S. Dollar

August 26, 2009 – Gold’s slide today is a continuation of decline that could quickly drop by 15 percent if the price falls below $900 an ounce, according to technical analysis.

Gold futures for December delivery slid 90 cents, or 0.1 percent, to $945.10 an ounce at 1:05 p.m. on the New York Mercantile Exchange’s Comex division, reported Bloomberg News. Bullion for immediate delivery in London fell 92 cents, or 0.1 percent, to $943.83.

The market for gold is showing a topping formation in time cycle analysis, said Allen Reminick, president of Blue Apple Trends. At about $940, a technical support line is still supporting the price, so gold could go up before a sustained down trend, he said.

“If the price of gold declines below $900, there is a very good chance it could drop to $800 per ounce very quickly,” said Reminick. “Further, time cycle technical formations indicate gold may plummet to $700 within 12 months,” he said.

The U.S. Dollar Index rose 0.446, or 0.6 percent, to 78.689, reported Bloomberg. A final trade at that level would produce the steepest gain since August 7.

The U.S. dollar will probably rise by 6 percent by early September, said Reminick.

Gold is a less attractive investment as the dollar rises, because gold becomes more expensive for people who do not hold dollars.

Time cycles are mathematical rhythms of market behavior, said Reminick. Identifying the cycles helps to locate time points for repeated highs and lows. Once the patterns in historical data are located, they can repeat for up to nine to 12 months on a daily chart basis, he said. Blue Apple Trends offers trading programs that use time cycles to predict market behavior.

-- Laure Edwards