Spot Gold Prices - Daily Candle Chart 3rd April 2009

With stock markets around the world reacting positively to the G20 summit communique yesterday in London, gold prices fell on the day, and closed with a wide spread down bar which finished below all three moving averages. However, it is interesting to note that the candle’s lower wick bounced off the $908 level as indicated on the chart, suggesting that this support region remains in place, and providing a possible barrier to any move lower today. It will be interesting to see, once the froth has been removed from the top of the coffee, whether the G20 actually achieved anything of note, other than simply to grab a few headlines with a large number. The fundamental problems still remain, with the banking industry loaded with toxic debt, a problem which has still not been addressed. In my opinion, once the world leaders are back in their own countries, the meeting will be seen for what it was, a chance for the leaders to be seen to be ‘doing something’. As with many of these events, nothing has changed fundamentally, and the concept of 20 leaders agreeing anything is laughable, so how will all of this affect the price of gold. In short, I suspect that once the detail is analysed over the next few days, the equity markets will move lower, which in turn will prompt a move higher in the price of gold, and from a technical perspective, much will depend on the support level highlighted above. If this holds, then we should see a move back up in due course, but in the short term, and with the bearish engulfing candle of yesterday, this may not happen immediately.It is also interesting to note that gold prices fell, despite being price moves in both crude oil, and a weaker US dollar which normally favour the price of gold, so clearly some of the more ‘traditional’ correlations are falling out of balance at present, largely due to the global economic background which now surrounds all markets.

My view in the short term is that we are likely to see a further period of sideways consolidation, before gold prices turn bullish once again, and the key will be whether the $908 support level holds firm. If not then we could see a re-test lower to $885, and if this is breached then a possible re-test of support at the $855 region an above. For a confirmed bullish move higher we will now need to see the $955 resistance broken, with a clear move back above all three moving averages.

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

Support:    $901.15 (yesterday’s low)                                   Resistance: $945.32 (high of 26/03/09)

Support:    $900.00 (psychological level)                               Resistance: $936.15 (high of 27/03/09)

Support:    $882.90 (low of 18/03/09)                                   Resistance: $907.92 (yesterday’s high)