Gold futures price chart - 15th October 2010

The December gold futures contract on Globex moved higher once again yesterday but with a muted tone, and having breached the $1380 per ounce early in the gold trading session, pulled back to close marginally below, with a narrow spread up candle and a deep shadow to the upper body. As with silver futures, this hinted at some short term weakness on the daily chart, which duly arrived today with the December gold futures contract trading lower this evening at $1364.60 having initially reached an intra day high of $1386.40 earlier in the session. This short term retracement has done little to dent the longer term trend however, as we continue to trade well above all three moving averages with both the 9 day and 14 day MA’s providing excellent support as the bullish trend for gold continues ever higher, and at present shows little sign of slowing or reversing soon.

From a fundamental perspective the threat of deflation continues to loom both in the US and elsewhere around the globe as central banks do battle in the currency wars in an effort to weaken their respective currencies, whilst investors worry about the best long term solutions for their assets. Gold of course continues to benefit in this respect as does silver, but the question many traders, investors and analysts are now asking is for how much longer can the current strong trend in gold and other commodities continue. With bonds, commodities and equities all gaining at present, one or more of these assets will experience a sharp sell off at some point soon – the question of course is when!

All I can say from a technical perspective is that the bullish picture remains firmly in place for the time being, with yesterday’s weakness merely a temporary retracement in an otherwise strong upwards trend.

The December gold futures contract surged higher once again on the daily chart ending with as a wide spread up candle which just failed to touch the $1380 per ounce price handle before closing lower at $1371 per ounce, further extending the bullish trend for gold once again.  This bullish momentum has spilled over into this morning London gold trading session with the market higher once again and trading at time of writing at $1381 per ounce, up more than $11 on the day and just short of the $1388 all time high.  The trend higher continues to find excellent support from both the 9 and 14 day moving averages and with the 40 day also pointing sharply higher the longer term outlook remains firmly positive for gold.  In addition to the strong technical picture gold is also benefitting from the weakness in the US dollar, triggered by the recent FED announcement regarding QE2, and as such, is likely to climb higher still as investors seek more secure asset classes for their investments, a trend that is also pulling silver higher.  Our longer term target remains $1450 per ounce, although Goldman Sachs has recently revised their forecast to $1650 per ounce by next year.