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Gold Futures Prices 21 Oct 2010

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Gold Futures Chart 21 Oct 2010

December gold futures traded with a heavy tone today and, at time of writing, were $19 per ounce lower at $1325.20, having reached an intra day high of $1349.60.  From a technical perspective the move lower today was signalled in yesterday’s gold futures trading session by the narrow spread up candle failing to breach the 14 day moving average and which consequently provided a barrier to any move higher in today’s gold futures trading session.  The wide spread down bar of Tuesday, triggered by the Chinese interest rate increase, has clearly spooked the metal market, driving up the US dollar and commodities lower.  The question, of course, is whether this is simply a short term correction for gold or a longer term change of sentiment and my personal view remains the same, that Tuesday’s news was insufficient to make this call at this point.  From a technical perspective we are now trading between the 9 and 14 day moving averages to the upside and the 40 day below and this should provide the requisite platform of support, if tested, at the $1298.50 level.  The further the retracement then the more likely that speculators and investors will buy back into the market, sending gold higher once again and re-establishing the longer term trend for the commodity in due course.  My target for the year end is $1450 per ounce and for this to be achieved we need to see a break and hold above the 9 day moving average which currently sits at $1355.40 and once achieved a run towards the high of late last week at $1385 per ounce which will then provide the platform for a continuation of the longer term trend.