Spot Gold Prices - Daily Candle Chart 10th March 2009

Following our look at the weekly chart on Monday, today we are back with the daily candles, with yesterday’s price action producing a wide spread down bar, with a small bottom shadow, which penetrated both the 9 day and 14 day moving averages. In addition this has provided a warning signal in the short term with a bearish engulfing pattern on the day. As I mentioned yesterday, we may be in for a period of ‘toppy’ price action, as spot gold prices consolidate in this region, before re-testing the $1000 per ounce once again, but it is interesting to note that the low of yesterday bounced off support at the 40 day moving average. Today we may see gold prices fall further, possibly to test support at the $910 level once again. If this region is penetrated in the next few days, then we may see a further fall, with the price of gold falling to the next level of support at $860. In the longer term I still believe that the bullish momentum will continue, and that the current reversal should be seen as buying opportunities for new long term positions.

Looking at the broader picture, part of the reason for the fall in gold prices yesterday was due to the steadying in equities which removed some anxiety from the markets. In addition a strengthening US dollar also pressured gold, given that after recent rallies in the greenback a growing number of investors currently prefer the dollar to gold as a safe haven investment. In addition, Warren Buffet warned that quantitative easing could trigger a return to the 1970’s style inflation, but didn’t then endorse bullion as a hedge, thus undermining gold prices. Last but not least jewelery sales data from Abu Dhabi reaffirmed ongoing contraction in global demand for gold jewellery.

The short term trend is bearish while the medium and long term trends are bullish.

Support:    $910.10 (yesterday’s low)                                   Resistance: $958.15 (high of 15/03/09)

Support:    $906.78 (low of 05/03/09)                                   Resistance: $943.55 (14 day moving average)

Support:    $890.40 (low of 10/02/09)                                   Resistance: $942.10 (yesterday’s high)