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Gold Trading – Gold Market Analysis 27th August 2009

Gold Trading Chart 27 Aug 2009

Gold Trading Chart 27 Aug 2009

Another day of indecision and volatile price moves as the gold market continues to trade in an increasingly narrow consolidation range, and ending the gold trading session with a long legged doji which once again neatly sums up the day – indecisive and lacking any direction. With all three moving averages now tightly bunched there is little in the way of any meaningful analysis from these technical indicators, and until this sideways price action on the gold chart is breached with a breakout to the upside or downside, there is little more that one can say at present.  My feeling is that the gold market is now waiting for a return to higher trading volumes once we enter a new month with traders returning from the summer holidays, and sparking the gold market into life once again.  In addition the gold price has also suffered from ETP (Exchange Traded Products) withdrawals which in July saw the second largest monthly outflow since the inception of this product back in 2003, with a lot of this money finding its way into the equity market.    The major technical levels are now defined at $975 and $905 and should one of these be breached then we can assume that a new trading trend has been established and to trade the gold market accordingly. In the meantime with the gold chart now forming a strong pennant formation on the daily chart, with the point of the pennant around the $950 per ounce price level, we must now wait for a breakout from this increasingly congested price region on the gold chart. When the breakout does occur it will be dramatic and one of the best ways to benefit from the current trading set up is to use a straddle strategy using options, a directionless trade which wins provided we see a volatile move in one direction or the other. For gold trading, this now seems increasingly likely as we continue to trade in an ever tighter range, but this volatile move may not appear until the start of next month as gold traders return to the market and gold futures volumes pick up once again.

Support: $930.35   Resistance: $955.67

Support: $918.23   Resistance: $929.89

Support: $905.43  Resistance: $917.90