Gold Chart - Spot Gold Prices 14th April 2009

Spot gold prices ended the day higher yesterday, gaining $13.65 to settle at $894.30, closing just above the 9 day moving average, and whilst this was a positive signal, there are several other factors that need to be considered before concluding that this is any form of bullish reversal. First, the markets were extremely thin yesterday, with many European markets closed for the long Easter holiday, therefore any analysis of the daily  gold chart must take this into account. Secondly, and perhaps more importantly the high of yesterday failed to hold above the 14 day moving average, and in addition failed to pierce the resistance in the $900 region immediately ahead, which is a worrying sign. If the upwards momentum of yesterday is to be maintained then we will need to see a break above this resistance followed by penetration of the secondary resistance in place between the $930 to $950 per ounce region for any run back towards the $1000 per ounce once again. The key this week will be the start of the earning season for US equities which now gets into full swing, and should the results of the major corporates be worse than expected then we could see a flight back to gold as a safe haven status, possibly coupled with a weakening of the US dollar. Indeed this was the main driver behind the move up in gold prices yesterday, with a fall in equity markets, a weaker US dollar, and continued concern about General Motors, after reports from the US Treasury directing GM to lay the foundation for a bankruptcy filing by June 1st deadline. That in turn triggered safe haven buying with some analysts indicating that the price of gold was due for a bounce anyway, suggesting  that in the last few weeks the precious meta has been oversold in the market.

With the earnings season in full swing, my suggestion for today and for the next few days is to trade with extreme caution, on an intra day basis only, and using the short term charts for your entry and exit points. For today, I would look for small long positions, and enter on hammer candles or long legged dojis, with an exit strategy on a shooting star or bearish engulfing signal. As always trade with tight stop losses and move these up to lock in any profits.

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

Support:    $880.65 (yesterday’s low)                                   Resistance: $913.30 (high of 11/03/09)

Support:    $871.05 (low of 07/04/09)                                   Resistance: $909.85 (high of 03/04/09)

Support:    $851.90 (low of 23/01/09)                                   Resistance: $899.75 (yesterday’s high)