Gold Spot Price - Weekly Candle Chart 9th March 2009

Gold Spot Price - Weekly Candle Chart 9th March 2009

As it’s the start of a new trading week, I thought we would start with a look at the weekly chart for spot gold, which may give us a few more clues at the likely direction for spot gold prices in the next few days. The first obvious signal was the bearish engulfing candle of two weeks ago, which gave us an early warning signal that perhaps the price of gold was likely to reverse in the short term, and as with all candlestick analysis there are two things we have to do in order to use the signals with any degree of confidence. First we have to wait for the signal to be confirmed by the following bars, and second we need to support our analysis using western indicators – remember candlestick analysis does not work in isolation alone. So what is the weekly chart telling us? Well in simple terms, the first important point to note is that the bearish signal failed to follow through with any significant fall, ending the week only marginally lower than the previous week’s close. The doji candle formed has a deep lower shadow which penetrated the 9 week moving average, but recovered to close well above, and with all three averages now indicating a move higher. The doji candle of last week, suggests that higher prices are likely with the bears attempt at a move lower, having been overcome by the bulls buying the market later in the week, and as a result we should expect to see a further attempt at the $1000 per ounce target in the next period. Until this region is breached we could see some “toppy” price action, so whilst I believe the bullish momentum will continue, we could see some sideways movement, as we approach this psychological barrier.

Moving to the daily analysis, spot gold prices moved higher on Friday breaking above the 9 day moving average supported by a weaker dollar and safety buying from nervous investors who continue to see equity markets as uncertain with potentially more downside moves. As expected the payrolls data was largely in line with economists’ views, but participants are coming back into the markets as there’s still no end in sight to the recession. So after finding support by holding the $900 level earlier last week it seems the uptrend in gold is reasserting itself. As I have mentioned before, gold is now returning to its traditional role of a safe haven asset, with many smaller investors now buying into ETF funds, some of which are now holding more gold reserves than many central banks – a trend that seems likely to continue for some time to come. If you would like to see the latest gold price just follow the link.

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

Support:    $929.60 (Friday’s low)                                      Resistance: $958.15 (high of 15/03/09)

Support:    $906.78 (low of 05/03/09)                                   Resistance: $949.59 (14 day moving average)

Support:    $890.40 (low of 10/02/09)                                   Resistance: $944.95 (Friday’s high)