Spot gold moved higher yesterday on the back of a weaker US dollar and a continued strengthening in crude oil prices, gaining $3.71 to settle at $894.31/oz, but failing to capitalise on the flight to quality, as equity markets strengthened, capping any gains in later trading.  All of this was despite a bigger than expected decline in US gross domestic product, with the broad markets focusing on the gains in consumer spending, coupled with the reduction in public spending, rather than on the raw data itself, which was far worse than expected. This seems to be symptomatic of the markets at present, which are currently looking for any silver lining or good news story to help return a more positive tone, which makes trading gold, or indeed any other asset or derivative at the moment, extremely difficult. Many market analysts and commentators are still of the opinion, that until the banks are declared clean, and all the toxic assets clearly identified and ring fenced, then any recovery will be a false dawn, and likely to falter as soon as it begins.  Yesterday was very typical of what we are increasingly likely to see, with bad fundamental news or data having an opposite effect on the market.

From a technical perspective, yesterday’s candle closed higher on the day in the gold chart, and marginally above both the 9 day and 14 day moving averages, and with a deep  upper wick which briefly crossed the psychological $900 per ounce price point, before falling back below this region once again. For any longer term bullish trend we now need to see spot gold prices break through this resistance level and hold above the $918 per ounce region, for any sustained move higher, and with the current appetite for risk now apparently returning to equity markets, this may prove to be tough going in the next few days. The first target on the daily gold chart is for a break above the 40 day moving average coupled with a move through the existing resistance in the $900 per ounce level and above. If this occurs then we should see a return of the bullish momentum of early February, but any failure at this level could see a retest of the $870 region once again. My trading suggestion for today in spot gold is to attempt small long trades, intra day, using the 15 minute and 30 minute charts with a stop loss below the $864 price region, and with small profit targets.

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

Support:    $887.10 (yesterday’s low)                                   Resistance: $922.77 (high of 04/03/09)

Support:    $871.50 (low of 16/04/09)                                   Resistance: $918.50 (high of 27/04/09)

Support:    $864.25 (low of 20/04/09)                                   Resistance: $903.00 (yesterday’s high)