Gold - Reaches 3-Month High Near $1333

by: Dean Popplewell

By Stuart McPhee

Gold for Wednesday, July 2, 2014

After several days of classic signs of indecision with its multiple doji candlestick patterns on the daily chart, gold has made an attempt to push higher and move away from around $1320. This has seen it move to another two-month high above $1332. Its recent indecision all happened around and just below the recent resistance level around $1320. 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 immediately after it eased away ever so slightly and consolidated with its flow of doji patterns. 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 which 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 53% 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 a 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 slingshotting 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 high near $1400 before returning to its present trading levels closer to $1300.

Gold settled at its loftiest level since mid-April on Tuesday as bets that record-low interest rates will persist buoyed stocks. Expectations that interest rates will remain at record lows for some time yet and upbeat Chinese data lifted U.S., European and Asian stocks on Tuesday, traders said. Low interest rates tend to favor non-yielding bullion. "Lower interest rates are for sure a supportive factor for gold, and if that idea spreads in the market, it might trigger investor invest there as well," Heraeus trader Alexander Zumpfe said. "(NYSE:I) could imagine that ETF buying we already saw over the last couple of days is (also) delivering some support." U.S. gold futures for August delivery ended the trading session $4.60 higher at $1,326.60 an ounce, its best settlement price since April 14. Spot gold, meanwhile, hit a three-month high at $1,332.10 an ounce, before easing to $1,327 an ounce.

(Daily chart / 4 hourly chart below)

Gold July 2 at 00:35 GMT 1326.1 H: 1327.8 L: 1325.7

Gold Technical

S3 S2 S1 R1 R2 R3
1240 - - 1330 - -

During the early hours of the Asian trading session on Wednesday, gold is doing next to nothing as it trades in a small range below $1330 after surging higher in the last couple of days or so. This limited activity has occurred after it ran into resistance around $1330 in recent times. Current range: trading just below $1330 around $1326.

Further levels in both directions:

• Below: 1240.

• Above: 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 way back to close to 50% for the first time in a while as gold has surged higher to a three month high above $1330. The trader sentiment remains in favour of long positions, but only just.

Economic Releases

  • 01:30 AU Trade Balance (May)
  • 06:00 UK Nationwide House Prices(Jun)
  • 08:30 UK CIPS/Markit Construction PMI (Jun)
  • 09:00 EU PPI (May)
  • 12:15 US ADP Employment Survey (Jun)
  • 14:00 US Factory Orders (May)

*All release times are GMT