NEW YORK (Reuters) - Gold’s biggest one-day fall in nine months has put prices on track to test $1,000 per ounce for the first time in six years, technical analysts said on Thursday, deepening a years-long rout as loose U.S. monetary policy comes to an end.
“Right now we have a double bottom, but I don’t see that holding,” said Adam Packard, vice president of operations at brokerage Zaner Group in Chicago.
“If we close below $1,045 tomorrow ... I see more people throwing in the towel.”
On Thursday, COMEX gold futures for February delivery GCcv1 settled down 2.5 percent at $1,049.60 an ounce after the U.S. dollar .DXY surged in response to the U.S. Federal Reserve’s decision on Wednesday to raise interest rates for the first time in nearly 10 years.
Higher rates weigh on bullion by lifting the opportunity cost of holding such a non-yielding asset.
Gold has fallen more than 11 percent so far in 2015, hitting its lowest in six years largely on speculation that monetary policy will tighten. Prices are down around 45 percent from all-time highs of $1,943 hit in 2011.
Gold ETFs, which saw huge inflows during the post-2008 financial crisis, have recorded outflows for three years, while hedge funds’ net short positions in COMEX gold futures reached record levels this month.
Technicians noted that bullion’s session low of $1,046.80 was just above the Dec. 3 low of $1,045.40, the weakest since October 2009 on a continuation chart.
Spot gold XAU= fell as much as 2.4 percent to $1,047.25 an ounce on Thursday, less than $2 above the Dec. 3 low of $1,045.85, the lowest since February 2010.
Packard said the session’s sharp move lower was within the range of a double bottom with the Dec. 3 low. A double bottom is when two session lows are the same levels and this pattern often reinforces a support level.
“If we bust through $1,040, we’re probably not going to stop for a while,” Packard said, noting the next target around $987-$990 and then $950.
Dave Toth, market insights senior analyst for RJO’Brien in Chicago, said it’s only a matter of time before the Dec. 3 low is broken.
“The trend is down on virtually all scales and is expected to continue and perhaps even accelerate, with strength above at least $1,078 and preferably $1,088 required to threaten or negate that.”
Editing by Andrew Hay