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By Stuart McPhee

Gold for Monday, August 18, 2014

Over the last week or so gold has been meeting resistance around $1313 which has seen it finally ease lower to end last week and at the start of this week. A couple of weeks ago it moved well away from the support level at $1290 and back up well above $1300 to a two week high above $1322 before easing lower. It had also 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 a few weeks ago. 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 below 60% again as gold has remained steady around $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 ended lower on Friday, but it managed to inch up from session lows after reports that Ukraine forces had engaged an Russian armored column on Ukrainian soil boosted the metal’s safe-haven appeal. A Ukrainian military spokesman said that Ukraine forces had tracked the armored column after it crossed the border. The Ukrainian president told British authorities that Ukraine artillery had destroyed part of the armored equipment that crossed the border during the night, according to a presidential website. Russian military forces denied the claims. “Risk has evaporated from the markets after the Ukraine headlines,” said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington. “We have seen investors use the yen and Swiss franc as safe harbors.” U.S. gold futures for December delivery settled $9.50 an ounce at $1,306.20 an ounce, having earlier hit a session low of $1,293.00 an ounce. It was down about 0.3 percent on the week. Spot gold was last down 0.6 percent at $1,305 an ounce.

(Daily chart / 4 hourly chart below)

Gold August 18 at 01:00 GMT 1299.8 H: 1305 L: 1299.6

Gold Technical

S3 S2 S1 R1 R2 R3
1290 1275 1240 1330

During the early hours of the Asian trading session on Monday, Gold is easing lower and looks like breaking through the $1300 level again after remaining quite steady throughout last week. Current range: trading right around $1300.

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

Economic Releases

  • 22:45 (Sun) NZ PPI Inputs & Outputs (Q2)
  • 01:30 AU New motor vehicle sales (Jul)
  • 09:00 EU Trade Balance (Jun)
  • 14:00 US NAHB Builders survey (Aug)

*All release times are GMT