Spot Gold Prices - Daily Candle Chart 4th March 2009

We were wise to take a wait and see approach to yesterday’s trading, as spot gold prices registered their sixth down day in a row on the daily candle chart, with yesterday’s candle just touching the 40 day moving average. Once again the move was perceived as ‘forced liquidation’ as investors sold their gold assets in order to raise cash to deal with the recent steep declines in equities. So far the surge in investment demand proved to be enough to offset the slump in jewellery consumption particular from India , the world’s top buyer, but exchange traded funds for gold have now reached a standstill.

From a technical perspective the important issue for today will be whether the support area in the $910 region actually holds, with the signs from yesterday suggesting that it might. Firstly, the lowest price of the day yesterday failed to penetrate this region, and secondly as mentioned earlier, the low of the day failed to move across the 40 day moving average. Clearly the bearish engulfing signal that we saw in the weekly charts is now firmly in place, and as traders we need to see the next few days as possible buying opportunities into the longer term bullish trend, but IF and only WHEN we see a reversal signal, either in the daily or the weekly chart. So today is another wait and see day – if the support level remains unbroken, then this may be the catalyst to a reversal, but if this is broken today, then we may see a move back past the $900 and down towards the $875 region.

Support:    $904.89 (40 day moving average)                             Resistance: $962.85 (high of 27/02/09)

Support:    $904.85 (yesterday’s low)                                   Resistance: $948.07 (9 day moving average)

Support:    $890.40 (low of 10/02/09)                                   Resistance: $932.75 (yesterday’s high)

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