Spot Gold Prices - Daily Candle Chart February 4th 2009

Following the bearish engulfing signal we saw on Monday, yesterday saw gold prices trade in a narrow range and finally close with a doji candle with a small down body, which has not confirmed the bearish signal for the time being. Whilst the wick of the candle crossed the 9 day moving average, I do not believe this is significant at the moment, and certainly not enough to suggest a change in the short term direction at present, and indeed with the moving average acting as a support line, one could expect a move higher in the short term.

On the day spot gold prices dropped below the psychological $900 per ounce level reversing the previous day’s gains as consolidation and profit taking continued in the face of a weaker US dollar which often trades inversely to gold. The outlook for gold is still firm on news of a strong investment demand for coins, bars and exchange traded funds, but that is partly offset by a crashing demand for jewelery especially in Asia . In the short term the direction of gold’s price is likely to be dictated by the clash between investors taking profits, and those buying gold on long term fears for the US dollar as a currency.

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