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Gold futures chart – analysis 16th November 2010

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Gold futures chart - 16th November 2010

December gold futures staged a minor recovery in yesterday’s gold trading session, following the dramatic fall in gold prices on Friday, triggered by market nervousness after fundamental data from China gave a clear signal that the economy is over heating, as it comes under increasing inflationary pressure. This in turn sparked a collapse in commodities, as expectations of a down turn in demand loomed ahead of the weekend, which were quelled to some extent in trading yesterday as the People’s Bank of China kept their interest rates on hold for the time being. As a result, trading in December gold futures was muted yesterday with the commodity closing marginally lower and failing to break above the 14 day moving average on the daily chart. This short term negative sentiment has continued for gold in the futures trading session today, with the December contract currently trading at 1356.50, down 12 cents per ounce on the day.

The key for the short term is now the 40 day moving average which sits immediately below the current price action in the 1346.80 area, and provided this holds firm, then we can expect to see this key indicator provide a platform of support and a bounce higher. In addition, this price point also coincides with some deep price congestion, and working in tandem these two technical price levels should combine to prevent a further fall for the commodity. The longer term outlook remains firmly bullish with the 200 day moving average on the spot gold chart confirming this longer term view, but in the short term we can expect some further bearish pressure, before gold prices recover to climb higher and towards our longer term target of $1650 per ounce next year.