Spot Gold Prices - 17th March 2009

Spot gold prices finished lower yesterday, with the daily candle closing below all three moving averages, providing yet more evidence of the short term bearish momentum currently being experienced in the metals sector. Whilst the decline in prices has not been dramatic, it does show a steady fall, particularly when we begin to see a pattern of failed attempts to move higher, as we saw on Friday last week, with the high of the day failing to hold at the $935 level, matching the failures of the week before. The key test will come as spot gold prices approach the support region just below the $900 level, and if this fails to hold we could see a retest of support at the $875 region. The fall yesterday came on the back of a continued rebound in equities from multi year lows, losing  8.55 dollars on the day and closing at at $913.85/oz.

From a fundamental view, it seems that the two stories that originally pushed spot gold prices up almost daily, inflation and the flight to safety, are now out of favour with investors, but it remains to be seen if the recent rally in stock markets led by the  financial sector is sustainable putting further pressure on gold. As I have said many times before, I believe that the bullish momentum will return to gold once the short term bounce in equities stalls, and the euphoria of a ” recovery” is seen for what it is – empty words. Whilst yesterday’s housing figures in the US were slightly better then expected, they can hardly be considered a positive sign that the worst is over in the housing market, and my view of gold as an excellent investment and long term bullish trade remains unchanged. For intra day trading today I would suggest small short positions this morning and watch for the fundamental news this afternoon in the US.

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

Support:    $911.65 (yesterday’s low)                                   Resistance: $938.50 (high of 13/03/09)

Support:    $906.55 (low of 12/02/09)                                   Resistance: $929.70 (high of 16/03/09)

Support:    $890.40 (low of 10/02/09)                                   Resistance: $924.10 (yesterday’s high)