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May 26 (Bloomberg) -- Gold may target a record $1,250 an ounce as a continuation head-and-shoulders pattern may be forming within a longer-term trend, Standard Bank Group Ltd. said, citing trading patterns.
A break and close above $1,050.40 “provides warning that an important breakout” has occurred, Darran Grabham, the bank’s technical analyst, wrote in a note yesterday. A head-and- shoulders pattern is formed when a commodity makes three consecutive peaks, with the middle being the highest. It forms during a series of increases over time.
“The positive implications are substantial, with the minimum objective situated at $1,250,” Grabham wrote. “On the downside, gold weakness through $864 turns the outlook bearish, and the weaker trend could then continue towards $802.”
Gold for immediate delivery traded little changed at $957.29 an ounce at 8:09 a.m. Singapore time. The precious metal is down 7.4 percent from its record high of $1,032.70 on March 17, 2008.
In the near term, a negative bias is expected to dominate in the days ahead as the positive trend has faltered in the $960 to $966.70 area, Grabham wrote.
“A decline into the $940 to $935 zone is anticipated, with $935 regarded as an important support point over the next week or so,” he wrote. “We expect gold to enter a period of consolidation below $966.70, before a break higher occurs, setting up a test on $980.” So-called support levels are where buy orders are clustered.
“If $935 gives way -- delaying the next move higher -- the sell-off could continue to $925, with $915 representing another key near-term support level,” Grabham added. “Weakness through $915 negates the positive outlook, exposing the market to the $895 to $885 area.”
To contact the reporter on this story: Glenys Sim in Singapore at Last Updated: May 25, 2009 20:59 EDT

Commentary: Our favorite precious metal continues to shine in the light of Quantitative Easing, governments buying their own bonds and increasing deficits. Even if the Canadian dollar heads toward parity with the US dollar, gold's attractiveness grows.