Spot Gold Price - Daily Candle Chart 10th March 2009

Spot Gold Price - Daily Candle Chart 10th March 2009

Following the bearish engulfing candle of Monday in the daily chart, this was confirmed with yesterday’s price action with a wide spread down bar for the price of gold, which ended the day well below the 40 day moving average, and more importantly penetrating the support level in the $900 – $905 region. With all three moving averages pointing lower, and with the support region now breached, we should expect spot gold prices to fall further in the short term, and the next key area on the chart is the minor support at $880 per ounce. The short term bearish sentiment now seems firmly in place with yesterday’s decline of over $25 a significant move which was largely attributed to a big rally in the equity markets, with additional pressure coming from poor physical demand. So stock markets doing better is not good news for spot gold at the moment,  which was pushed up in the first place by the panic buying. Some analysts also observed money coming out of other safe haven instruments as well, notably the US dollar. As long as the focus remains on the short term deflation then the longs in gold could continue to liquidate.

My suggestion for the short term is therefore to look at small short positions with a view to taking profits quickly, as the euphoria we saw in the equity markets yesterday could be short lived, with many analyst describing it as a dead bear squeeze! There is no evidence to suggest that the worst is over, and yesterday’s reaction in equities ( in my view at any rate ) is that this was a temporary move by the market makers to attract buying into the markets before moving prices lower in the longer term.

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

Support:    $890.85 (yesterday’s low)                                   Resistance: $936.63 (14 day moving average)

Support:    $890.40 (low of 10/02/09)                                   Resistance: $922.00 (yesterday’s high)

Support:    $873.95 (low of 29/01/09)                                   Resistance: $915.23 (40 day moving average)