Spot Gold Prices Daily Chart - 24th March 2009

Spot gold prices continued to be hurt by profit taking as risk aversion waned following the Treasury Department’s unveiling of a program that may generate $1 trillion in financing, with the Dow Jones Industrial Average soaring nearly 500 points on the news. Plans to buy illiquid assets using up to $100 billion in funds from the Troubled Asset Relief Program and capital from private investors pushed the stock markets sharply higher.  Whilst the daily candle for gold finished as a down bar, given the size of the rally on Wall Street, this was hardly a surprise, and many analysts feel that the fall in the gold price was modest, given the strength of the move in equities, perhaps suggesting that gold is still seen as a safe haven, and that the rally in equities may only be a short term bounce with more bad news yet to come. Spot gold lost 9.1 dollars on the day to settle at $941.8/oz. The moving averages are still pointing to higher prices, and the close of yesterday remained above all three, with a new resistance level now established in the $925 to $935 region.  My suggestion for today is to buy into the market on any reaction lower, using the hourly chart for you entry and exit points. Inevitably there will be a move lower this morning on the Treasury news, but this may dissipate in later trading as the news is absorbed and analysed which is often the case.

Gold often moves inversely to equities and is sold when other investments perform well and market worries ease. If the plan succeeds in relieving banks of toxic assets gold is likely to fall but if the plan is considered unsuccessful gold is likely to rally further. The COT index suggests that the bullish momentum is still in place, and I have updated the COT index for the latest CFTC data last night.

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

Support: $935.75 (yesterday’s low) Resistance: $974.17 (high of 17/02/09)

Support: $931.50 (low of 26/02/09) Resistance: $967.00 (high of 20/03/09)

Support: $929.60 (low of 06/03/09) Resistance: $957.50 (yesterday’s high)