The price of spot gold continued to move lower once again yesterday, following the market’s nervous reaction to a potential interest rate rise in China, sparking fears of falls in demand across the commodity sector as inflation continues to take a firm hold in the Chinese economy. Over the weekend however, the People’s Bank of China kept rates on hold for the time being, calming the markets in the short term. Despite this decision, spot gold continued to press lower, ending the day with a relatively narrow spread down candle on the daily chart, which broke and held below the 14 day moving average, and adding a further layer of bearish sentiment to the metal.

From a technical perspective the move lower can as no great surprise, and indeed this was our conclusion on the 10th November last week following the weakness seen on the daily gold chart with the shooting star candle. Whilst the move lower was more significant than we had expected, this has not changed the longer term technical picture which remains firmly bullish, and provided the 40 day moving average remains unbroken in the 1,246.81 per ounce region, then we can expect to see spot gold prices recover in due course and continue their longer term upwards momentum. In the short term, we now need to see a break and hold above the 14 day moving average at $1,374.10 per ounce, and thereafter a move above the 9 day moving average at $1,386.46 which would then open the way for a test of the $1400 per region and beyond in due course.

As I have said many time before ( and I make no apologies for it ) I am a confirmed gold bug, and like silver, gold continues to remain an excellent longer term investment, and whilst many analysts are calling the top of the market, my own view is that we are well away from any major correction for the precious metal, and I expect to see spot gold making record highs in the next few weeks, and on towards my target for the Q2 next year of $1650 per ounce and beyond.