Spot Gold Price Chart - Gold Prices 23rd June 2009

Spot gold experienced a sharp decline yesterday as the commodity market (along with others) was hit by a wave of profit taking and some return of Dollar strength.   In addition with physical gold demand remaining weak and specialist gold backed exchange traded funds not recording any fresh inflows this current pullback may have some way to go.  Spot gold prices fell $12.20 to settle at $923.15.  From a technical perspective yesterday’s wide spread candle confirmed that the catalyst we have been waiting for has been ignited with the low of the day finishing well below the 40 day moving average and closing marginally above the support level in the $920 price region.  To add to the bearish picture the 9 day has now crossed the 40 day and the 14 day average may well follow suit shortly.   Whilst the longer term picture remains bullish in the short term the depth of this reversal will depend on where gold prices find their cushion and initially this could be back at the pivotal $900 per ounce or even back towards $882 last seen in early May.   The key to any reversal in the spot gold prices is the US Dollar and whether investors perceive the Dollar or gold as the better vehicle to hedge against economic or geopolitical risk and herein lies the apparent contradiction that we are seeing at present.  If we look at the Dollar index chart there is nothing to suggest from yesterday’s candle that spot gold (or indeed other commodities) should have fallen so heavily and if the correlation were correct we should have seen a consequent wide spread up bar on the index, which is clearly not the case.

The short term trend is bearish, the medium term trend is sideways while the long term trend is bullish.

Support:    $917.85 (yesterday’s low)                                   Resistance: $956.02 (high of 21/05/09)

Support:    $914.93 (low of 18/05/09)                                  Resistance: $939.10 (high of 19/06/09)

Support:    $911.25 (low of 12/05/09)                                   Resistance: $935.00 (yesterday’s high)