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By Stuart McPhee

Gold for Monday, June 30, 2014

For several days now, gold has shown classic signs of indecision with its multiple doji candlestick patterns on the daily chart, which tend to indicate a weakness in the prevailing uptrend. This has all happened around and just below the recent resistance level around $1320, which represents its recent two-month high. A couple of weeks ago, gold enjoyed a stunning surge higher to break through some key levels along its way to reaching a two-month high just above $1320, and in the time since, it has just eased away ever so slightly and consolidated with its flow of doji patterns. In moving so well, it was able to move back through the key $1275 level for the first time in two weeks, although resistance at that level kicked in and halted any rise for a few days. It was also able to break through the $1300 level, and this level is likely to play a role again, should gold ease lower, which is likely. If sellers do take advantage of these relatively higher prices, it will most likely bring the $1300 level back into play. The OANDA long position ratio has dropped to its lowest level in a couple of months around 54%, showing a much more bearish sentiment than the long-term average.

A couple of weeks ago, gold did very well to repair some damage and return to the key $1275 level, then it has continued the momentum, pushing higher to its recent two-month high. After moving so little for an extended period, gold dropped sharply several weeks ago from above the well-established support level at $1275 as it completely shattered this level, falling to a four-month low around $1240. It remained around support at $1240 for several days before its recent rally higher. Prior to the strong fall a few weeks ago, gold had remain fixated on the $1293 level and had done very little, as volatility has dried up completely, resulting in gold moving very little. It pushed down towards $1280 before sling-shotting back, and also had an excursion above $1300 for a short period, before moving quickly back to the $1293 area again. Over the last few weeks, gold has eased back from around $1315 to establish its recent narrow trading range below $1295, before its recent slump.

Over the last few 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 level near $1400, before returning to its present trading levels closer to $1300.

Gold settled higher on Friday, posting its fourth straight weekly gain, as weak U.S. data on consumer spending hurt the dollar. U.S. consumer spending rose less than expected in May, prompting economists to downgrade estimates for second-quarter growth. The dollar was poised to end the week with a whimper, dropping to a more than one-month low against the yen on Friday, after downbeat U.S. spending data gave investors no reason to hope for higher U.S. rates anytime soon. U.S gold futures for August delivery ended the trading session $3.00 higher at $1,320.00 an ounce, up 0.4 percent for the week. Spot gold, meanwhile, was up 0.1 percent at $1,318 an ounce, undermined by profit-taking and a lack of news. Still, the metal was not far from $1,325.90 - its highest since mid-April, hit earlier in the week.

(Daily chart / 4-hourly chart below)

Gold June 26 at 03:10 GMT 1318 H: 1319.9 L: 1317.4

Gold Technical

S3S2S1R1R2R3
1240--1320--

During the early hours of the Asian trading session on Thursday, gold is doing next to nothing, as it trades in a small range just below $1320. This limited activity has occurred after it ran into resistance around $1320 at the end of last week. Current range: trading just below $1320 around $1318.

Further levels in both directions:

  • Below: 1240
  • Above: 1320

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 below 60% for the first time in a while, as gold has surged higher to a two-month high above $1320. The trader sentiment remains in favour of long positions.

Economic Releases

  • 01:30 AU Private Sector Credit (May)
  • 05:00 JP Housing starts (May)
  • 06:00 JP Construction orders (May)
  • 08:00 EU M3 Money Supply (May)
  • 08:30 UK BoE - Mortgage Approvals (May)
  • 08:30 UK BoE - Net Consumer Credit (May)
  • 08:30 UK BoE - Secured Lending (May)
  • 08:30 UK M4 Money Supply (May)
  • 09:00 EU Flash HICP (Jun)
  • 12:30 CA GDP (Apr)
  • 13:45 US Chicago PMI (Jun)
  • 14:00 US Pending Home Sales (May)

*All release times are GMT

Source: Gold - Indecision Remains Below $1320