Seeking Alpha
Currencies, macro, fixed income
Profile| Send Message|
( followers)  

By Stuart McPhee

Gold for Monday, August 25, 2014

Over the last week now gold has been falling lower back towards the medium term support level at $1290 however to finish out last week it fell sharply down to the previous key level at $1275. For the last day or so it has been able to enjoy support there and consolidate. A couple of weeks ago gold was meeting resistance around $1313 which saw it finally ease lower. 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 month or so the $1290 level has shown some signs of support and held gold up until its recent fall. 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 to near 75% as gold has fallen sharply back down towards $1275. 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 settled higher on Friday as U.S. equities slipped, but gains were limited by fears over deflation after Federal Reserve Chair Janet Yellen said U.S. labor markets remain hampered by the effects of the Great Recession. In a speech at a central banking conference in Jackson Hole, Wyoming, Yellen said the U.S. central bank should move cautiously in determining when interest rates should rise, as economic disruption of the last five years has left millions of workers sidelined, discouraged, or stuck in part-time jobs. U.S. gold futures for December delivery settled $4.80 lower at $1,280.20 an ounce, down about 2 percent on the week-the biggest drop since the week ended July 18. Spot gold rose 0.2 percent to $1,280 an ounce, not far from a two-month low of $1,273.06 hit on Thursday. Bullion has dropped about 3 percent in the past five sessions, under-performing U.S. Treasury bonds, which are considered the preferred safe-haven investment, traders said.

(Daily chart / 4 hourly chart below)

Gold August 25 at 00:35 GMT 1278.8 H: 1281.5 L: 1274.2

Gold Technical

S3S2S1R1R2R3
12751240-1330--

During the early hours of the Asian trading session on Monday, gold is trading in a narrow trading range right above $1275 after its recent sharp fall which saw it move strongly from above $1290. Current range: trading right around $1277.

Further levels in both directions:

• Below: 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 above 70% again as gold has fallen sharply back down towards $1275. The trader sentiment is strongly in favour of long positions.

Economic Releases

  • 22:45 (Sun) NZ Trade Balance (Jul)
  • 14:00 US New Home Sales (Jul)

*All release times are GMT

Source: Gold - Support At $1275 Standing Firm