Daily Gold Chart 22 July 2009

Yesterday’s trading in spot gold prices was characterised by indecision and uncertainty, as the broader markets absorbed the comments from FED Chairman Ben Bernanke during the first of his two day testimony on the US economy and proposed fiscal and economic policy moving forward.  As a result the daily gold chart closed with a long legged doji, with closing price closing the session where it opened, and marginally below the $950 dollar per ounce level. From a technical perspective this is not an encouraging sign for gold bulls, as such a candle is often the first signal of a possible reversal in gold prices, and given that we have seen a run up from $905 per ounce to the current level, this may well indicate a short term reversal lower in the short term. However, as always we need to wait and see whether this candle is indeed confirmed in trading today.

With all three moving averages providing good support and with the 9 day now approaching the 40 day, the signs are good, however, as gold traders we cannot ignore such a signal, and the key to its strength will be whether we see a breach of the strong resistance immediatley ahead.  In short, should the $955 per ounce price handle be breached then this should provide a solid platform for a move higher and the doji candle of yesterday can then be discounted.  However, should this resistance prove to be a barrier, then we may well see a reversal lower with the $940 price level acting as support in this case. Today sees phase two of the Ben Bernanke testimony which yesterday took the forex markets by surprise leading to a sudden return to strength for the US Dollar – hence the reversal in spot gold.  In addition there appears to be some speculation that in today’s testimony Bernanke will lay out the ground-rules for withdrawing the “proverbial punchbowl” in order to prevent excess at the FED’s expense.  In his WSJ article he did outline 5 ways for mopping up excess liquidity in the event of the economy recovering.  His comments today will be designed to allay investors’ inflationot necessarily good for gold prices, so all in all another nervous day in prospect for the markets in general, which will no doubt be reflected on the gold chart.  My trading recommendation remains the same, i.e. to stand aside until the fundamental fog has cleared and yesterday’s doji candle has either been confirmed or ignored.  In addition given we are only $50 away from the all important, all time high of $1000 per ounce for spot trading will continue to be very challenging.

Support $940.40    Resistance $955.60
Support $929.30    Resistance $939.20
Support $905.30    Resistance $921.70