Gold Falls Below $900 As It Nears 100 Day Moving Average

The party was really rocking, with free drinks provided by Nationwide, G20 and the FASB (the ECB promised to buy the next round). Then someone worked out the beer was alcohol free; it was all fizz and no body.

A quiet end to the week for me. I tend not to deal ahead of US payrolls, though admittedly I missed a good trade in backing Sterling. I used the time wisely, hitting the gym for only the second time this week, then installing my new computer with all the extra work that involves.

So far my only trade of the day was to close out part of my short in FTSE at 4070 for a £75 profit. Yesterday I set a limit order to sell FTSE at 4145, and although I just missed out during lunchtime my order was filled in late afternoon trade. My mate, Harry Hindsight, has already pointed out that I should have kept it running, but that trade was only ever meant as a bonus trade on top of my existing short.

Hey, any non-believers in the dark arts, check out where the FTSE ran out of steam; and Wall Street, and the Dax (just). The 100-day moving average did a damned good job of repelling the bulls, for the time being at least. The FTSE chart shows that this average has worked pretty well over the past few months though, equally, fans of Mr Bollinger could make the same claim.

I’m concerned that there could be further to go on the upside and if a re-test of the 50-day MAV holds I might be tempted into a tentative long bet at around the 3950 level.

Not quite an exciting breakout yet, but my caution on the gold price was justified. For the past week hitting the 21-day moving average has been an increasing struggle; today’s battle has been to hold the $900 level. It’s a tempting short bet, but two things are stopping me.

Firstly, it’s madness to open up and carry a bet over the weekend; I’ll make a diary note for an early look on Monday. The other thing holding me back is news that Gordon Brown has advised the IMF to increase its sales of gold bullion- Now you can’t get a more bullish signal than that!

Looking at the chart the gold price is in a key area. A forgiving analyst might just say that it’s holding the trend line, others would disagree. Just below here is the 21-week moving average at $879 and 100-day moving average at $875. If I’m at my desk enough next week my money’s going to be on a test of those levels.

My discipline has been poor this week, leaving me with a couple of unnecessary losses due to jumping the gun on trades. This was definitely the case with short bets on the FTSE; if I hadn’t opened the first bet so soon I could have opened a bigger position higher up. In the meantime I’m not looking to carry positions over the weekend. I’ve no idea if the FTSE’s going to 50 points up or down on Monday morning so why take the risk?

Next week sees the start of a new tax year and I need to use that to tighten up again on my trading style and risk management. In the meantime I’m going to switch over to Paddy’s sports page and have a bet on the rugby.

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