Gold must hold $800 chart support to rally again

By Frank Tang - Analysis

NEW YORK (Reuters) - After the widespread sell-off in commodities, gold must hold above the key $800 support level to have a shot at resuming its long-term bull run, technical analysts say.

Even though bullion is poised to bounce following a sharp retreat from its all-time high, the precious metal could still trade range-bound as it tries to carve out a new base on the charts in the near term.

"Gold was oversold on a technical basis, which means a move to the downside was too extended in too short of a time. Normally, a market bounces or rallies to help consolidate its recent move after it is oversold," said Adam Sarhan, founder of Florida-based TheSarhanAnalysis.com.

In spite of gold's recent heavy losses, it has still soared furiously -- it was trading at just $250 an ounce in 2001 -- as investors poured into the market due to inflation fears amid a commodity boom.

On Wednesday, spot gold traded at $830 an ounce, sharply below its record high of $1,030.80 set on March 17 and a secondary peak of $987.75 on July 15. U.S. COMEX gold futures for December delivery were at $835 an ounce.

The sharp decline was prompted by a technical sell signal triggered on the charts when gold tanked below its multi-month base at $846 in early August, Sarhan said.

Technical analysis focuses heavily on past performance and charts as a reference to forecast future price movements.

Still, gold is well above its 9-month bottom of $773.90 set on Aug 15.