Gold - Eyes Down On Key $1290 Level

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

By Stuart McPhee

Gold for Tuesday, August 12, 2014

To finish out last week Gold exhibited signs of a rejection pattern with its last red candlestick which has been followed through a little to start this week as it has eased lower back under $1310. In the middle of last week it moved well away from the support level at $1290 and back up well above $1300 to a two week high above $1310 before easing lower. 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. 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 back above 60% again as gold has eased away from $1310. 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 edged lower on Monday, hovering below a three-week high as tensions between Ukraine and Russia eased and investors turned to rising global shares and some withdrew from exchange-traded gold funds. Late on Friday Russia's Defence Ministry said it had ended military exercises in southern Russia, which the United States had criticised as a provocative step in the Ukraine crisis. Spot gold was down 0.2 percent at $1,307 an ounce. It reached a three-week high of $1,322.60 on Friday before easing back. U.S. gold futures for December delivery settled down 50 cents at $1,310.50. "If gold did not manage to push higher on the back of all the political tensions over the past few months, there is the risk that it will fall (below $1,300) because on the other side there is the pressure coming from the developments on the Federal Reserve side, the tightening of interest rates and the stronger dollar," ABN Amro analyst Georgette Boele said.

(Daily chart / 4 hourly chart below)

Gold August 12 at 01:25 GMT 1308.7 H: 1309.3 L: 1307.1

Gold Technical

S3 S2 S1 R1 R2 R3
1290 1275 1240 1330 - -
Click to enlarge

During the early hours of the Asian trading session on Tuesday, Gold is trading in a small trading range right around $1308 after moving up well to finish out last week. Current range: trading right around $1308.

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 moved back above 60% as gold has surged back up above $1310. The trader sentiment is strongly in favour of long positions.

Economic Releases

  • 23:50 (Mon) JP GDP (Prelim.) (Q2)
  • 01:30 AU House Price Index (Q2)
  • 01:30 AU NAB Business Confidence (Jul)
  • 04:30 JP Capacity Utilisation (Jun)
  • 04:30 JP Industrial Production (Final) (Jun)
  • 09:00 EU ZEW Survey (Aug)
  • 18:00 US Budget (Jul)
  • WLD IEA Monthly Oil Market Report

*All release times are GMT