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LONDON (Reuters) - Gold's recent rally to six month highs may spark a further jump to levels last seen in the second half of 2013, technical analysts said, but fresh highs could be followed by a slide back to last year's three-year lows.
Bullion is currently on track for its biggest quarterly rise since 2007, after prices hit a six-month high last week from a break of key resistance at $1,361.60 an ounce.
That has opened the way for a return to the highs seen in August at $1,433 an ounce, according to analysts who look at past price movements to gauge the next likely direction of trade. However, that could mark a turning point for gold.
"We are targeting the $1,400 area, then $1,424-1,434, which are the highs from June of last year and August," Commerzbank analyst Axel Rudolph said on Monday. "(But) it may stall there and come off again -- we'll have to watch it very closely over the next week or so."
"From a longer term perspective, looking at the end of this year and next year, we could have a break below last year's lows," he said, referring to the near three-year low of $1,180.71 gold hit in June. "We could go to $1,100-1,150. This is part of a large corrective move, and we're getting towards the top of that range."
The metal is currently at $1,376 an ounce, just below the level it traded at late in New York on Friday.
Murray Gunn, head of technical analysis at HSBC, said his Elliott Wave analysis suggests that there is scope for marginal new highs from here, before a drop back towards the $1,000-an-ounce level.
Last week's break of the October high, he said, "increases the probability that slightly higher levels will be seen before the correction from the middle of 2013 is over."
Gold prices crashed dramatically last year after breaking below long-term support at $1,525 an ounce. Prices dropped more than $200 an ounce in less than three days after that level gave way, and ended the year down 28 percent.
Although the metal has risen more than 10 percent since the start of February, momentum indicators are not yet suggesting that the market is becoming overbought, analysts say, meaning that the move higher is still intact in the short term.
Gold's 14-day relative strength indicator (RSI) remains just below the 70 level that would indicate overbought conditions, at 69.4, and other indicators are not yet looking overstretched, analysts said.
In the near term, the $1,400 level is expected to offer some near-term resistance, though this round number will be largely psychological.
"We are seeing higher highs and lower lows, and we're technically in a bull trend," Lynnden Branigan, a technical analyst at Barclays Capital, said.
"At around 1,400 people might be looking to take a little bit of money off the table, but overall, I think we have room to test the highs of last August, so we're looking at a target in the $1,434 area."
The 38.2 percent retracement of the long-term uptrend from October 2012 to June 2013, at $1,416, is also likely to provide some pause for thought, technical analysts at ScotiaMocatta said.
Editing by Keiron Henderson