Spot Gold Chart 23 July 2009

With Ben Bernanke’s two day testimony now complete the markets can begin to absorb his comments, which were broadly in line with expectations, and did nothing to spook equities, commodities, bonds or currency, which will no doubt settle back into the summer lull. The daily gold chart was typical of many others, ending the day with a narrow spread doji candle and closing the trading session marginally higher. Whilst the bullish tone seems to be well established for gold prices at present, we need to be cautious, as in the last three days we have see the price of gold peak during the day at the $954 per ounce level, only to fall back later in the session, leaving a series of upper shadows in a line which are starting to look ominous for two reasons. Firstly this suggests that there is some resistance at the price level to a move higher, and secondly the resistance established at the $955 price level now seems to be a significant barrier to any move higher, so the two technical levels may be combining. If this is repeated today, then this analysis may be reinforced further, and we could see a short term reversal as a result. Only a break and hold above these levels will discount this analysis and leave us with a clear run higher to the elusive $1000 per ounce once again. All three moving averages are providing solid support and with the 9 day about to cross the 14 day average then this adds to the bullish tone at present, but this should be viewed with caution in light of the above analysis.  From a fundamental perspective investment in gold exchange traded funds, gold coins and small bars has slowed in the second quarter according to the World Gold Council’s latest Investment Digest.  Traditionally the demand for gold has been as an inflation hedge but with other asset classes such as oil having recently outperformed gold many investors are now turning to the broader commodity sector not only for these better returns but also as their hedge of choice.

Support: 938.20     Resistance : 955.60
Support: 925.30     Resistance : 937.36
Support: 905.46     Reistance : 925.96