Spot Gold Price Chart - Daily Gold Prices 25th June 2009

The correlation between a weak US Dollar and rising gold prices appears to have been ignored yesterday as spot gold prices moved higher gaining $7.72 to finish at $932.62 per ounce in the face of Dollar strength following the FOMC meeting.   The FOMC statement and decision to keep rates on hold was more of an anti-climax than many had been predicting with the only change from April’s statement being the removal of any reference to deflation.  Whether this would have had any influence on the price of gold is debatable, much more likely is the growing realisation that the gold market is facing a problem of supply in the face of rising demand.  Here is a link to a very interesting interview with Evy Hambro manager of the £2bn Blackrock Gold and General Fund who explains why spot gold prices will once again reach $1000 per ounce.   From a technical perspective we now have to keep several inter-related, but contradictory factors in mind in our analysis of the gold chart over the next few months.  In particular we could be facing the apparent break in the correlation between gold and a weak Dollar and, to a lesser extent, between gold and silver which also appears to have changed subtly as a result.  This was something I alluded to in an earlier commentary where the candle on the gold chart was mildly bullish whilst the candle on the silver chart gave us no clear signal.

So what of yesterday’s candle?  Firstly, gold prices closed sharply higher, responding positively to the hammer signal of the previous day and before the gold bulls become overly optimistic I would like to highlight two cautionary signals.  The first of these is the fact that the candle closed the session with a deep upper weak and second that the high of the day failed to penetrate both the 14 day moving average which seems to be acting as a barrier along with resistance at the $940 price level.  To add to this cautionary picture I would also point out that the 14 and 40 may be about to cross and that the close of yesterday failed to breach the 9 day moving average, which again seemed to act as a barrier.  In the longer term my view is that gold prices will once again move higher to re-test the $980 price region in due course and ultimately move back above the four figure level, but in the short term and certainly for inter day trading the various changes in correlation and sentiment outlined above may make gold trading tricky at present.

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

Support:    $921.65 (yesterday’s low)                                   Resistance: $958.20 (high of 12/06/09)

Support:    $912.70 (low of 23/06/09)                                  Resistance: $943.15 (high of 17/06/09)

Support:    $904.65 (low of 08/05/09)                                   Resistance: $941.30 (yesterday’s high)