Gold Chart 21 Jul 2009

Gold Chart 21 Jul 2009

Yesterday’s candle on the spot gold price chart, provides us with several interesting points to consider for our daily analysis of the spot gold market today, and one which may indicate the direction for gold prices in the next few weeks. The first point to note is that the candle finished the trading session with a wide spread up bar, which closed above the 40 day moving average, suggesting that the bullish tone is now firmly established once again, following the short term reversal of June. In addition, the price of gold also broke through the interim resistance level at $940 per ounce, which should now provide a solid platform to attack the $950 resistance area immediately ahead. The bullish tone is further confirmed by the 9 day crossing back above the 14 day moving average once again, so all in all a healthy picture for gold bulls. The only slight cloud on the horizon is the deep upper wick to yesterday’s candle which hints at a possible short term reversal, but given the positive factors outlined above, this may well be outweighed today as the bulls take control. However, the $950 to $955 resistance level is key, and should not be under estimated, and if this is breached in the next few days, then we may well see a run back up to re-test the $1000 per ounce level once again. From a fundamental perspective the markets will be listening very carefully to Fed Chairman Ben Bernanke today and tomorrow as he testifies before the Senate Banking  Committee in Washington.  The testimony usually comes in 2 parts: first he will read a prepared statement (a text version of which is available on the Fed’s website at the the start), then the committee will hold a question and answer session.  Since the questions are not known beforehand the markets will seize on any unguarded or unscripted comments, often resulting in heavy market volatility.   Gold traders will be particularly keen to know the Fed’s exit strategy from its current loose monetary policy together with the likely direction of short term interest rates and the fate of the US Dollar, all of which can impact the price of spot gold in the short, medium and longer term.   My trading suggestion for today is to step aside and wait for the markets to digest the statement and subsequent comments.

Support                                     942.30                         Resistance                                 957.20

Support                                    930.60                           Resistance                                941.00

Support                                    920.40                           Resistance                               931.00