Gold may extend declines after failing to hold its break above $1,000/$1,040 an ounce, Barclays Capital said, citing trading patterns. Combined with the recently completed “head and shoulders” top, this suggests gold is likely to “head lower in range” in the near term, Jordan Kotick, New York-based global head of technical analysis at Barclays Capital, wrote in a note e-mailed today. A head and shoulders pattern is a peak, followed by a higher peak, then another peak. It forms after an uptrend and once completed, gold should move lower. “We are disappointed by the move below $882, as this has alleviated the bullish potential we previously noted for the months ahead,” Kotick wrote. “Our preferred wave count suggests further corrective activity this quarter,” he added, referring to the Elliott Wave Theory. Gold for immediate delivery gained as much as 0.7 percent to $875.20 an ounce today, and traded at $874.70 at 9:14 a.m. in Singapore. The metal dropped to $865.49 yesterday, the lowest since Jan. 23, and 14 percent down from this year’s high of $1,006.29 on Feb. 20. “While capped by $900, the risk is for further weakness to a swing target near $845, or even a measured move at $805,” wrote Kotick. “In the bigger picture, we are holding onto our view of a move to $1,200, though this is now likely a story for the second half of 2009.”

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