Spot Gold Prices - Gold Price Chart 16th July 2009

Price action on the gold chart seems to be swinging in favour of the inflationists as the US dollar continues to weaken in the face of better than expected fundamental data and talk of additional stimulus measures given the fragility of the economic recovery.  For example whilst the US retail sales figures have come in better than expected, once fuel and vehicle sales have been stripped out the numbers are actually down on last month.  From a technical perspective the spot gold price closed the trading session yesterday on a wide spread up bar which powered through the 14 day moving average but failed to breach the 40 day moving average which seemed to provide a degree of resistance to any move higher.  As a result the price of gold finished $13.98 higher to settle at $938.75 per ounce.  The question of course is now whether this is simply a short term squeeze higher or the portent for a longer term rally and yet another assault at the $1000 per ounce price point, and the answer to this will depend on both the technical and fundamental pictures.  Firstly if we start with the fundamental element, the recent rally in gold prices has been fuelled by an improved risk for appetite in equities and consequent decline in the US Dollar.  However, it has to be said that once again equity markets are trading on sentiment following good results in the first tranche of bellwether stocks to release their quarterly earnings, and today sees IBM and Google who are due to release after the closing bell.   Should this sentiment continue then equity markets will follow suit and rally further pushing the US Dollar ever lower as can be seen on the Dollar Index and boosting yet further the spot gold price.  Technically whilst yesterday’s up bar was an encouraging sign it is important to note that it failed to breach and hold above the resistance level in place just below the $940 per ounce level and, in addition, as outlined above, the 40 day moving average provided resistance to any move higher.  These two factors combined may suggest we will see some profit taking later today followed by a reversal.  Only a break and hold above the current resistance level, which will then become support, can it said that the rally may continue further with support from all three moving averages.

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

Support:    $924.05 (yesterday’s low)                                   Resistance: $948.22 (high of 26/06/09)

Support:    $917.25 (low of 14/07/09)                                   Resistance: $946.60 (high of 01/07/09)

Support:    $912.70 (low of 23/06/09)                                   Resistance: $942.10 (yesterday’s high)