Friday's announcement that European central banks had agreed to reduce their annual sales quota of gold bullion by 20% to 400 tonnes did briefly spark some life into spot gold prices, which managed to reach an inter day high of $963 per ounce before falling back in later trading. This reduction in the quota appears to be a fresh sign that the "anti gold" attitude of the recent past may be fading away. The statement from the banks confirmed that gold sales "will be achieved through a concerted programme of sales over a period of five years, starting on 27 September 2009, immediately after the end of the previous agreement". The statement continued: "Annual sales will not exceed 400 tonnes and total sales over this period will not exceed 2,000 tonnes". This new agreement will also "accommodate" the IMF's plan to sell 403 tonnes of gold from its reserves. However, there is doubt whether any of the top ten holders of gold bullion are likely to sell any of their holding given that the Swiss National Bank has already stated that it has no plans to sell any of its gold any time soon. From a technical perspective Friday's widespread down bar came as no great surprise and merely confirmed the long legged doji candle formed on Thursday which I suggested would see gold prices fall as a result. It is relatively rare to see such a clear trading signal and this candle was almost text book in its definition. The depth of this reversal will now be dictated by the support levels immediately below, the first of which seemed to prevent any further fall on Friday from the $954 price level and the second of these sits just below at $948. Should both of these be breached today then we may well see prices continue to drop, possibly even as far as $935 per ounce, particularly if both the 9 and 14 day moving averages are also pierced. However, thin trading volumes will make gold trading both volatile and tricky.
