By Stuart McPhee
Gold for Wednesday, July 30, 2014
For the few days to start this week gold has been slowly but surely easing back towards the $1300 level where it is now looking for some support. In recent hours it dropped sharply through this level however it has held up above $1298. Gold did well at the end of last week to surge higher through the $1300 level back up towards $1310 before easing slightly to start this new week. The $1300 level has been reinforced as a level of significance in the last couple of weeks with gold falling sharply from its highs above $1345 back down to this level where it has been met with overwhelming demand. During the second half of June, gold steadily moved higher but showed numerous incidents of indecision with its multiple doji candlestick patterns on the daily chart. This happened around $1320 and $1330. Several weeks ago now 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 then able to slowly move higher to a four month high above $1345. It was also able to break through the $1300 level which has recently played a role again. 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 surged back up towards 70% showing a change in sentiment to more bullish.
At the beginning of June, 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 four 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 near $1400 before returning to its present trading levels closer to $1300.
Gold ended the trading session lower on Tuesday as uncertainty before a Federal Reserve policy meeting and key U.S. data later this week pulled the metal back from a one-week high hit on the back of violence in the Middle East and Ukraine. The Fed kicks off a two-day meeting on Tuesday, with markets watching for clues as to when the U.S. central bank will begin increasing interest rates. The bank will make a statement on Wednesday at the end of the meeting. Gold is highly sensitive to any changes in U.S. monetary policy. It rallied to record highs in the wake of the financial crisis after the Fed's extraordinary stimulus measures drove down interest rates while stoking fears of inflation. U.S. gold futures for August delivery settled down $5.00 at $1,298.30 an ounce. while spot gold was last down 0.3 percent at $1,299.60 an ounce, having peaked at $1,312.10 earlier.
(Daily chart / 4 hourly chart below)
Gold July 30 at 03:10 GMT 1299.5 H: 1300.4 L: 1298.2
During the early hours of the Asian trading session on Wednesday, Gold is trading in a very small range just below the key $1300 level after having recently dropped sharply back through this level in the last 24 hours. Current range: trading right below $1300 around $1299.
Further levels in both directions:
• Below: 1300, 1275 and 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 eased back a little towards 60% again as gold has gathered back around $1300 again. The trader sentiment is strongly in favour of long positions.
- 23:30 (Tue) JP Unemployment (Jun)
- 23:50 (Tue) JP Industrial Production (Prelim.) (Jun)
- 09:00 EU Business & Consumer Survey (Jul)
- 12:15 US ADP Employment Survey (Jul)
- 12:30 CA Industrial product price index (Jun)
- 12:30 CA Raw Materials Price Index (Jun)
- 12:30 US Core PCE Price Index (1st Est.) (Q2)
- 12:30 US GDP Annualised (1st Est.) (Q2)
- 12:30 US GDP Price Index (1st Est.) (Q2)
- 18:00 US FOMC - Fed Funds Rate (Jul)
*All release times are GMT