Gold Chart - Daily Spot Gold Prices 15th April 2009

From a technical perspective, yesterday’s gold trading, provided a narrow spread down candle with small wicks to the top and bottom and suggestive of a spinning top, closing the session between the 9 day and 14 day moving averages. More significantly gold prices failed to breach resistance at the $900/oz level, mirroring the events of Monday, which is a concerning feature for the longer term, and as a result the price of gold settled 5.5 dollars down for the day, and I believe this area of resistance will now provide the key for the medium term. In simple terms, if it is breached then we could see a return to the bullish momentum of February, and a  run back up to the $1000 per ounce level, but should this region hold firm, then the bearish tone may continue, weighed down by the moving averages which are now all turning lower.

The fundamental news for gold was dominated by the US data yesterday, and in particular the figures from the Labor Department which showed inflation falling more sharply than anticipated, which in turn could signal further economic weakness. As gold is often bought as a hedge against rising prices this news did little to help spot gold prices, and as as result had a negative impact yesterday. In addition the slight rise in the US dollar also added to the negative sentiment for gold, pushing prices lower.

Given the above technical picture, my suggestion for today is to attempt small shorts based on the price action of yesterday, and in particular the failure to breach the $900 per ounce level, coupled with the failure on Monday, using the intra day charts for your entry and exit points, and I would suggest any stop loss is placed in the $935-940 area. Make sure you use a trailing stop loss to lock in profits early, and remeber with the earnings season in full swing in US equity markets, gold prices will always be subject to market volatility as the stock markets react to the daily news from the blue chip corporates.

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

Support:    $885.70 (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: $898.40 (yesterday’s high)