Gold - Looking For Support At $1290 Again

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

By Stuart McPhee

Gold for Wednesday, August 20, 2014

Over the last few days, gold has been easing lower back towards the $1300. Now that it has broken through that level, it now has eyes on the previous support level at $1290. A couple of weeks ago 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. Just prior to that 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 up strongly towards 70% again, as gold has continued to ease 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 on Tuesday on buoyant global equities and as the dollar strengthened after upbeat U.S. data, while the market continued to monitor international political tensions. Palladium fell from a 13-year high of $900 an ounce hit in the previous session, supported by worries about supplies from top producer Russia and strong demand prospects. Prices were last down 1.1 percent at $878 an ounce. "It is mostly the demand side, with record-high car sales from China, while supply comes from South Africa and Russia, where there are continued disruptions… this makes it the perfect candidate for funds to step in," Saxo Bank senior manager Ole Hansen said. U.S. gold futures settled $2.60 lower at $1,296.70 an ounce, while spot gold eased 0.2 percent to $1,295 an ounce, after dropping 0.6 percent in the previous session.

(Daily chart / 4 hourly chart below)

Gold August 20 at 00:35 GMT 1295.7 H: 1296.1 L: 1294.7

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 Wednesday, gold is trading in a narrow trading range between $1294 and $1296 after easing ever so slightly over the last 24 hours. Current range: trading right around $1296.

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 up strongly towards 70% again as gold has continued to ease lower below $1300. The trader sentiment is strongly in favour of long positions.

Economic Releases

  • 00:30 AU Westpac-MI Leading Index (Jul)
  • 01:00 AU Internet Skilled Vacancies (Jul)
  • 04:30 JP All Industry activity index (Jun)
  • 10:00 UK CBI Industrial Trends (20th-25th) (Aug)
  • 12:30 CA Wholesale Sales (Jun)
  • 18:00 US Fed releases minutes from prior (Jul 29-30) FOMC meeting
  • UK BoE MPC minutes released

*All release times are GMT