Spot Gold Chart 31 July 2009

Following the two steep falls in gold prices on Tuesday and Wednesday, yesterday’s up candle provided some relief for gold bulls, ending the session with a narrow spread up bar, which closed the trading session marginally below the 40 day moving average, where the high of the day seemed to find some resistance to any move higher.  Coupled with this, spot gold prices are now below a congested area of consolidation which will take a considerable amount of effort to penetrate, if the losses of the last few days are to be reversed.  With inherent weakness in the daily gold chart, coupled with the momentum of the last two days, this seem unlikely at present, and certainly not today with many gold traders squaring their positions for both month end and ahead of the weekend with thin trading volumes as a result.  In addtion there is little fundamental news on the economic calendar for today, other than the advance GDP numbers in the US, to change investor sentiment.  The key to any longer term move lower will be whether the technical support levels now provide a springboard, or simply collapse under the downwards pressure, with the first of these now coming into play at the $925 per ounce level. Should this fail then the next major level is at the $905 region, and if this should also fail to provide support, then we would almost certainly see a steeper fall below the $900 per ounce level and back towards the $870 in due course.

The short term outlook is bearish, the medium term is sideways and the long term bullish

Support 925.67  Resistance 941.65
Support 905.89 Resistance 924.76
Support 890.34 Resistance 904.12