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By Stuart McPhee

Gold for Friday, May 9, 2014

Over the last few days gold has just eased back a little from around $1315 which included a short sharp fall back down below $1300 down to support around $1290. It has now steadied and consolidated around the $1290 level for the last couple of days or so and is finding good support there. Prior to the fall it had done well to surge higher to around $1315 towards the end of last week which saw it move well off support around $1280. If gold was to retreat again back towards $1275 then a large descending triangle would be forming which would indicate lower prices below $1275. Over the last couple of months the $1275 level has established itself as a level of support and on several occasions has propped up the price of gold after reasonable falls.

Throughout the second half of March gold fell heavily from resistance around $1400 back down to a several week low near support at $1275. Both these levels remain relevant as $1275 continues to offer support and the $1400 level is likely to play a role again should gold move up higher. Through the first couple of months of this year, gold moved very well from a longer term support level around $1200 up towards a six month higher near $1400 before returning to its present trading levels closer to $1300.

Gold traded above this week’s low in New York as investors weighed the outlook for U.S. stimulus with tension over Ukraine. Prices fell 1.5 percent yesterday, the most since April 15, as Federal Reserve Chair Janet Yellen told a congressional panel “sufficient underlying strength” made measured reductions in bond purchases “appropriate.” While economic data show “solid growth” in the second quarter, the U.S. economy still requires stimulus, she said. The Bloomberg Dollar Spot Index reached the lowest since October as Yellen prepared to testify to U.S. lawmakers for a second day.

Gold slid 28 percent last year on speculation the Fed would scale back asset purchases. It rebounded 7.5 percent this year, partly as tension over Ukraine spurred demand for a haven. Russian President Vladimir Putin said Russia is testing its army’s combat readiness, ramping up tensions after pledging a pullback from Ukraine’s border. Pro-Russian separatists in Ukraine vowed to press ahead with autonomy votes. “Safe-haven buying has dominated jittery gold trading since early April amid a lack of other drivers,” Andrey Kryuchenkov, an analyst at VTB Capital in London, wrote today in a report. Declines are “likely, should matters de-escalate from here. We expect limited upside in the second half of 2014, with bullion ever-so sensitive to the Fed’s policy expectations.”

(Daily chart / 4 hourly chart below)

Gold May 9 at 02:40 GMT 1289.4 H: 1291.1 L: 1288.5

Gold Technical

S3S2S1R1R2R3
1290127513151330

During the early hours of the Asian trading session on Friday, gold is remaining very steady and trading within a narrow range right around $1290 after falling strongly in the last couple of days or so. Current range: trading right around 1290.

Further levels in both directions:

• Below: 1290 and 1275.

• Above: 1315 and 1330.

OANDA’s Open Position Ratios

(Shows the ratio of long vs. short positions held for gold among all OANDA clients. The left percentage (blue) shows long positions; the right percentage (orange) shows short positions.)

The long position ratio for gold has moved back up to 70% as gold remains lower under the $1300 level. The trader sentiment remains in favour of long positions.

Economic Releases

  • 05:00 JP Leading indicator (Prelim.) (Mar)
  • 08:30 UK Industrial Production (Mar)
  • 08:30 UK Manufacturing Production (Mar)
  • 08:30 UK Trade Balance (Mar)
  • 12:30 CA Unemployment (Apr)
  • 14:00 UK NIESR GDP Est. (Apr)
  • 14:00 US Wholesale Inventories (Mar)

*All release times are GMT

Source: Gold - Settles Around $1290