(1) is indeed sufficient. While squaring will alter the magnitude of a number, it has the same effect on the sign of a number as does the absolute value: negative becomes positive. Since the GMAT does not consider imaginary (complex) values, we know that if x^2 > y^2, x > y as well.
(2) is insufficient, as we know that 2 > 1 and thus |2| > |1|, but -1 > -2, but |-1| < |-2|. There's no way of knowing here.
So, the answer is A.
For these kinds of questions, if you can't reason it out, try to find two cases within the guideline that have different results. If you can find both of these cases, then that guideline is clearly insufficient to solve the question.
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