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Spotgold Trading Analysis 4 Feb 2010

Spotgold Price Chart 4 Feb 2010

Whilst yesterday’s shooting star candle on the daily gold chart was a signal that all was not well with the recent rally in the gold market, today’s very wide spread down candle seems an over reaction to the weakness of yesterday and can only be attributed to the continuing fall in the euro.  This clearly cannot be attributed to a flight from risk since if this were the case then we would see spotgold prices increasing rather than falling so clearly the underlying cause is not so clear cut.  Technically on the daily gold chart today’s strong sell off has broken below our key technical level at $1075 per ounce which has failed to provide any support to the fall and as a result we are now looking to the next level in the $1060 per ounce price region which we are now approaching.  Should this fail to provide any platform and be breached then we could see a much deeper move as a result with spotgold prices re-testing the $1025 per ounce price point and possibly even the $1000 in the medium term.  The key to any recovery will be whether spotgold prices can return to the prices seen in early January at $1150 per ounce.  At present this seems unlikely and given the apparent downwards trend of a series of lower highs and now potentially lower lows the bearish sentiment in the medium term seems well established and set to continue.  This view is further reinforced by the break below all three of our short term moving averages today but as yet spotgold prices have not reached the 200 day.  Longer term the weekly chart also remains bearish and merely confirms the deep shooting star of late 2009 which first signal potential weakness in the gold market and once again this is confirmed by the 9 week moving average crossing below the 14 week which is providing us with a bear cross signal.  Whilst the picture remains bearish in the medium term, longer term on the weekly chart we have a substantial clear area of water to the 200 day moving average which remains well below the current price action in the $800 per ounce region and with the deep congestion now waiting below the $1000 per ounce price point this could provide a solid platform for a reversal higher.

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