Gold - Enjoys Support At $1290 And Moves Back Above $1300

by: Dean Popplewell

By Stuart McPhee

Gold for Thursday, August 7, 2014

In the last 24 hours gold has surged higher away from the support level at $1290 and back up well above $1300 to a one week high. Over the last week or so gold had been easing lower and placing pressure on the support level at $1300 which eventually gave way resulting in gold falling sharply back down to a six week low near $1280. Over the last few weeks the $1290 level has shown some signs of support and held gold up and this level has been called upon again in the last week to prop gold up. The $1300 level has been reinforced as a level of significance in the last few weeks with gold falling sharply from its highs above $1345 back down to this level where it was initially 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. The OANDA long position ratio has moved back down below 60% again as gold has settled around $1300 for a little while. 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 back in May 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 strong rally higher. 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.

Way back since March, 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 soared past $1,300 on Wednesday on safe-haven buying triggered by worries that there could be an escalation of the military conflict in Ukraine and by a weak undertone in global equities. Investors bought gold and U.S. Treasury bonds and initially sold equities after NATO said Russia had massed about 20,000 combat-ready troops on Ukraine's border and could use the pretext of a humanitarian mission to invade, its starkest warning yet that Moscow could soon mount a ground assault against its neighbor. In addition, Russian President Vladimir Putin signed a decree banning or limiting imports of agricultural products for one year from countries that have imposed sanctions on Russia. U.S. gold futures for December delivery settled 1.8 percent higher at $1,308.20 an ounce. Spot gold spiked 1.6 percent to $1,308 an ounce, after closing flat in the previous session.

(Daily chart / 4 hourly chart below)

Gold August 7 at 00:55 GMT 1305.7 H: 1307 L: 1304.8

Gold Technical

S3 S2 S1 R1 R2 R3
1290 1275 1240 1330 - -

During the early hours of the Asian trading session on Thursday, Gold is easing back a little from the high just shy of $1310 which was reached after the strong surge higher in the last 12 hours or so. Current range: trading right around $1307.

Further levels in both directions:

• Below: 1290, 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 under 60% as gold has fallen back towards $1300. The trader sentiment is strongly in favour of long positions.

Economic Releases

  • 23:50 (Wed) JP Bank Lending Data (Jul)
  • 23:50 (Wed) JP Current Account (Jun)
  • 01:30 AU Unemployment (Jul)
  • 11:00 UK BoE MPC - APF Total (Aug)
  • 11:00 UK BoE MPC - Base Rate (Aug)
  • 11:00 UK BoE Monetary Policy Committee meeting and rate decision
  • 11:45 EU ECB - Rate Announcement (Aug)
  • 12:30 CA Building permits (Jun)
  • 12:30 EU ECB's Draghi gives press conference on rate announcement
  • 12:30 US Initial Claims
  • 14:00 CA Ivey PMI (Jul)
  • 19:00 US Consumer Credit (Jun)
  • JP BoJ Monetary Policy meeting (to 8th)

*All release times are GMT