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Gold Trading Analysis 9 Feb 2010

Spot Gold Price Chart 8 Feb 2010

With little meaningful news and markets focusing on the debt problems in Europe it was no surprise to see little price action across virtually all the markets including spot gold.  The gold trading session ended with a very narrow spread up candle and small wick providing little in the way of clues to the short term direction for the precious metal.  It is curious, to note, that given the risk aversion now self evident in the market with falling equities and a stronger US dollar, that we are now seeing investors buying into the gold market.   The gold price appears to be correlating negatively with the US dollar unlike at the time of the Lehman crisis when it rose in tandem with the greenback.  Technically Friday’s deep hammer candle remains the influencing factor in the short term as we wait for this signal to be validated (or not).  As outlined in yesterday’s market commentary we are trading in an extremely difficult range sandwiched between the short term moving averages directly above and the 200 day moving average immediately below and these indicators could hold the key to the medium term direction for the gold spot price.  With the hammer having tested support in the $1050 region should this hold, and the signal be validated then we may see a bounce higher, but with the sustained resistance now in place above this will require considerable momentum to breach this and all three moving averages.  To the downside any breach of the 200 day moving average would be critical and signal a deeper move as a result.

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