Gold - Eases Back To $1320

by: Dean Popplewell

By Stuart McPhee

Gold for Friday, July 4, 2014

After pushing higher to a three month high above $1330 a few days ago, gold has now just eased a little lower back to around $1320. After several days of classic signs of indecision with its multiple doji candlestick patterns on the daily chart last week, gold made an attempt to push higher and move away from around $1320; however, it has since seen more indecision before returning back to $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 few 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 lower on Thursday, halting a four-session win-streak, as the dollar extended earlier gains after U.S. nonfarm payrolls rose more than expected in June, increasing bets that U.S. interest rates could rise earlier than expected. Nonfarm payrolls increased by 288,000 jobs, while employment growth jumped in June and the unemployment rate declined to near a six-year low of 6.1 percent, the Labor Department said on Thursday. Economists polled by Reuters had forecast a gain of 212,000 jobs in June, marking a fifth month above 200,000. "Looking at the U.S. unemployment situation …it is interesting that we are well into the territory now that one would expect a normalisation of monetary policy (accompanied to) an interest rates rise," Mitsubishi Corp analyst Jonathan Butler said.

(Daily chart / 4 hourly chart below)

Gold July 4 at 01:00 GMT 1319.8 H: 1320.6 L: 1319

Gold Technical

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

During the early hours of the Asian trading session on Friday, Gold is doing next to nothing as it trades in a small range right around $1320 after easing back from above $1330 in the last day or so. This limited activity has occurred after it ran into resistance around $1330 in recent times. Current range: trading right around $1320.

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

  • Nothing to report - there is not much happening with releases due to the 4th July U.S. holiday

*All release times are GMT