Gold - Indecision Continues Under $1320

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

By Stuart McPhee

Gold for Wednesday, July 9, 2014

After pushing higher to a three-month high above $1330 last week, gold has spent the last few days now easing lower back to below $1320 and is showing more signs of indecision again after doing it a lot over the last few weeks. After several days of classic signs of indecision with its multiple doji candlestick patterns on the daily chart a couple of weeks ago, gold pushed higher before experiencing further indecision just under $1330 before easing lower. A few weeks ago gold enjoyed a stunning surge higher to break through some key levels along its way to reaching a then 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 few months around 51% 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 remained 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 near $1400 before returning to its present trading levels closer to $1300.

Gold ended the session slightly lower on Tuesday, as investors awaited clearer signs from the U.S. Federal Reserve that it is firmly on track to raise interest rates next year, while palladium touched a new 13-year high. A strong U.S. non-farm payrolls report last week pressured gold prices as it lifted speculation that the Federal Reserve could increase rates as soon as the first quarter of 2015. Higher rates would encourage investors to switch to assets that pay interest, which tend to be more attractive than bullion. U.S. gold futures for August delivery settled 50 cents lower at $1,316.50 an ounce, their lowest closing level since June 20. Meanwhile, spot gold eased 0.3 percent to $1,315 an ounce. The dollar dropped 0.1 percent against a basket of currencies.

(Daily chart / 4 hourly chart below)

Gold July 9 at 01:45 GMT 1318.6 H: 1319.9 L: 1317.8

Gold Technical

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

During the early hours of the Asian trading session on Wednesday, Gold is easing lower under $1320 after spending the last few days falling back from the highs above $1330. This limited activity has occurred after it ran into resistance around $1330 in recent times. Current range: trading right around $1319.

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 up a little now from 50% as it has eased back under the three-month high above $1330. The trader sentiment remains in favour of long positions.

Economic Releases

  • 00:30 AU Westpac Consumer Confidence (Jul)
  • 00:50 JP M2 Money Supply (Jun)
  • 12:15 CA Housing starts (Jun)
  • 18:00 US Fed releases minutes from prior (Jun 17-18) FOMC meeting

*All release times are GMT