Gold - Eases Below $1300

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

By Stuart McPhee

Gold for Tuesday, August 19, 2014

Over the last couple of days, gold has been easing lower, back towards the $1300 level and has just slipped just below that level of the last day or so. In the last week or so, gold had 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 above 60% again as gold has eased lower below $1300. 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 high near $1400 before returning to its present trading levels closer to $1300.

Gold settled lower around $1,300 an ounce on Monday as European and U.S. shares rebounded on an easing of tensions in Ukraine, while a steadier dollar and U.S. Treasury yields pushed prices below $1,300 an ounce. Russia's foreign ministry said "certain progress" had been achieved during talks between Russia, Germany, France and Ukraine in Berlin on Sunday about ways to end the military conflict in eastern Ukraine. "There is not really any proper pricing in of a risk premium … because the ultimate safe haven will turn out to be the dollar if things do escalate further in Ukraine, Iraq or Israel … and not necessarily gold," Mitsubishi analyst Jonathan Butler said. U.S. gold futures for December delivery fell $6.90 on the day to close at $1,299.30 an ounce. Spot gold was last down 0.4 percent at $1,299 an ounce. The dollar gained 0.2 percent against a basket of currencies after a sixth straight weekly loss, while the 10-year yield rose above 2.3 percent, but remained close to a 14-month low hit in the prior week.

(Daily chart / 4 hourly chart below)

Gold August 19 at 00:40 GMT 1298.6 H: 1298.9 L: 1296.8

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 narrow trading range between $1297 and $1299 after remaining quite steady over the last 24 hours. Current range: trading right around $1299.

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% again as gold has continued to ease lower below $1300. The trader sentiment is strongly in favour of long positions.

Economic Releases

  • 23:50 (Mon) JP Customs Cleared Trade (Jul)
  • 01:30 AU RBA minutes released
  • 03:00 NZ RBNZ Inflation Expectations (Q3)
  • 05:00 JP Leading indicator (Final) (Jun)
  • 08:00 EU Current Account (Jun)
  • 08:30 UK CPI (Jul)
  • 08:30 UK Input & Output Prices (Jul)
  • 08:30 UK ONS House Prices (Jun)
  • 12:30 US Building Permits (Jul)
  • 12:30 US CPI (Jul)
  • 12:30 US Housing Starts (Jul)

*All release times are GMT