goldevening18

In yesterday’s gold trading commentary we pondered on the short term direction for gold prices and reasons for their relative stability given the gyrations elsewhere in the financial markets.  Figures released by the World Gold Council may go some way to explaining what has been happening in the gold trading market.  It appears that world gold demand fell 9% in the second quarter to 719.5 tonnes as rising prices and the impact of the global recession curbed jewellery consumption except in China, which is the world’s second largest consumer, and here jewellery sales rose 6% to 72.5 tonnes with sales in Greater China (which includes Hong Kong and Taiwan) up 4% to 78.7 tonnes.  However, this decline has been counterbalanced by a sharp rise across a variety of gold investment products which has driven demand for gold to 222.4 tonnes from 151.9 tonnes last year, with gold backed ETFs rising sharply year on year.  Although ETF inflows slipped to 56.7 tonnes in the second quarter from a record 465.10 tonnes in the first three months of the year, they were still well ahead of last year’s second quarter inflows of just 4 tonnes. On the supply side central banks have turned into net purchasers of gold with 14 tonnes bought by this sector against net sales of 69 tonnes in the same quarter last year.  While central bank sales for the first half of the year totalled 38.7 tonnes, the lowest level since the first half of 1997, the  WGC confirmed that “Central banks outside the Central Bank Gold Agreement have been net purchasers since the second half of 2006 and gross purchases of almost 3o tonnes were recorded by central banks outside the CBGA during Q2 2009.”  The WGC went on to state “Although confidentiality issues prevents a detailed dissection of the numbers, it is worth noting that these purchases comprise modest net additions in a number of countries, rather than large purchases by just one or two countries”.  According to the WGC overall world gold supply was up 14% year on year to 927 tonnes from 812 tonnes, so plenty for gold bugs to ponder.

Meanwhile from a technical perspective the gold trading session had an interesting day, and indeed was a roller coaster ride with early falls being cancelled out following a resurgence in both oil prices and equities.  The candle created as a result was a deep hammer which has several unusual aspects to consider for tomorrow’s gold trading.  First the depth of the lower shadow suggests that the gold bulls are back in the market and we may see a further rise in gold prices in early trading, as a result.  Secondly the low of the day found support just above the $930 per ounce which was similar to that of Monday’s gold trading session.  Thirdly the close of the day found support from the 40 day moving average, and finally the resistance in place in the $937 price region also seems to provide support for spot gold prices.  All these factors would tend to suggest that we should see a rise in gold prices tomorrow but do bear in mind that with the gold market currently being driven by external forces and with the close proximity of the various moving averages any trading opportunities will tend to be limited to intra day rather than position trades.

With the recent price volatility in the gold market, this has presented many trading opportunities on both sides of the market, but to be successful you need a specialist gold broker who not only understands the market, but also offers tight spreads, along with the latest news from around the world affecting the commodities sector. One of the keys to success is to practise first, so if you would like a free trial of one of the best gold trading platforms around, then please just follow the link here, and get started trading in gold.

The short and long term is bullish and the medium term sideways.

Support:    $931.70 (yesterday’s low)                                   Resistance: $952.20 (high of 12/08/09)

Support:    $929.85 (low of 17/08/09)                                   Resistance: $948.10 (high of 17/08/09)

Support:    $925.37 (low of 29/07/09)                                   Resistance: $945.30 (yesterday’s high)