Gold - Continues To Consolidate Just Below $1330

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 |  Includes: AGOL, GLD, IAU, OUNZ, SGOL
by: Dean Popplewell

By Stuart McPhee

Gold for Thursday, July 3, 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, however, more indecision has surfaced with it now consolidating and moving very little just under $1330. Its previous indecision 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 51% 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 high near $1400 before returning to its present trading levels closer to $1300.

Gold ended higher for a fourth straight session on Wednesday ahead of the release of the closely watched June payrolls report on Thursday. U.S. gold futures for August delivery settled $4.30 higher $1,330.90 an ounce, its highest closing level since March 21. Spot gold, meanwhile, was up 0.1 percent at $1,327 an ounce. The metal hit a three-month high at $1,332.10 an ounce on Tuesday, but struggled to revisit those highs. It briefly traded as low as $1,321.01 after data showing U.S. companies hired 281,000 workers in June, the biggest monthly increase since November 2012, boosted stocks and the dollar. The focus of the week remains Thursday's U.S. non-farm payrolls report, which is seen as a key barometer of the world's largest economy.

(Daily chart / 4 hourly chart below)

Gold July 3 at 00:45 GMT 1326.1 H: 1328.2 L: 1325.8

Gold Technical

S3 S2 S1 R1 R2 R3
1240 - - 1330 - -
Click to enlarge

During the early hours of the Asian trading session on Thursday, Gold is doing next to nothing as it trades in a small range below $1330 after surging higher in the last few 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 Building approvals (May)
  • 01:30 AU Retail trade (May)
  • 08:00 EU Composite PMI (Jun)
  • 08:00 EU Services PMI (Jun)
  • 08:30 UK CIPS/Markit Services PMI (Jun)
  • 09:00 EU Retail Trade (May)
  • 11:45 EU ECB Rate Announcement (Jul)
  • 12:30 CA Merchandise Trade (May)
  • 12:30 EU ECB President Draghi gives press conference following interest rate announcement
  • 12:30 US Initial Claims (28/06/2014)
  • 12:30 US Non-farm & Private Payrolls (Jun)
  • 12:30 US Trade Balance (May)
  • 12:30 US Unemployment (Jun)
  • 14:00 US ISM Non-Manufacturing (Jun)

*All release times are GMT