Gold Trading Analysis 3 Sep 2009

Gold Trading Analysis 3 Sep 2009

As has been discussed in some detail in this gold market commentary the breakout in spot gold prices finally happened yesterday with both force and momentum as spot gold prices closed the gold trading session on a very wide spread up bar which finally broke out of the pennant pattern, and as a result we may now see the start of a serious bullish trend.  Yesterday’s surge higher took spot gold prices to near three month highs as risk averse investors turned to the precious metal after equity markets appeared to wobble.  The rise pushed gold above some important resistance levels, in turn triggering a wave of technical buying which, at one point, took the price of spot gold to an intraday high of $975.70 per ounce, up 2% on the day and the highest since early June.  What is interesting is that the rise in gold prices comes at a time of low jewellery demand, particularly from India, the world’s largest consumer of bullion, and whilst  physical demand for gold has improved compared with the start of the year, the latest import data for India shows that consumption remains weak.  The latest import figures from the Bombay Bullion Association showed that although imports rose in August from July to 12-14 tonnes, they were still almost 90% down from the same month last year.  This lacklustre performance is significant as traditionally Indian importers step up their buying ahead of the Diwali festival which this year is due in mid October and often marks the peak for retail jewellery demand.  Gold prices hit an all time high of almost $1,035 per ounce in March 2008 since when it has traded in a range between $700 and $1000, supported by investor inflows seeking refuge from the financial crisis.  From a technical perspective yesterday’s dramatic wide spread up bar at one point almost threatened to break above the resistance at $985, before finally settling marginally below, but given that we have now seen the end of this particular signal, we should see a sustained move higher in due course, with the $1000 per ounce gold price target now firmly in sight.  Yesterday’s move was also accompanied with good volume in gold futures and with all three moving averages pointing firmly higher, and with very little resistance now ahead, the bullish sentiment created in this breakout should continue for some time to come and therefore provide some excellent trade trading opportunities for gold traders in the next few weeks.