Is Gold on the Edge of a Violent Downturn?
CNBC.com | June 28, 2012 | 01:16 AM EDT
Gold is on the brink of a “violent downturn” and could even fall as low as $700 an ounce as the risk of deflation in developed economies grows and technical pointers turn bearish, one expert tells CNBC.

“Technical levels show us when the trouble is coming. Gold struggled at $1,700 and then at $1,600. If it breaks through the next key level of $1,500, which could be approaching soon, investors would start panicking and selling hard,” Yoni Jacobs, Chief Investment Strategist at Chart Prophet Capital said on Thursday.

Gold [ XAU= 1575.49  +1.09 (+0.07%) ], which has fallen below $1,600 eight times in the past 10 months, is currently trading below the key 200-day and 300-day moving average of $1,650 and $1,670, respectively. The 300-day moving average has supported the bull market in gold since 2001, however this is no longer the case, he said.

“It appears that the market has decided on gold's fate. And it's not looking pretty.  It looks like gold is about to see prices collapse and is on its way to $700,” Jacobs added.

The two main triggers for a large selloff in the precious metal could be a further slowdown in global economic growth - which would likely result in deflation - or inaction by leading central banks such as the Federal Reserve or the European Central Bank.