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Gold for Tuesday, August 26, 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, which is where it is presently sitting and consolidating. 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 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 level near $1400, before returning to its present trading levels closer to $1300.

Gold settled near its lowest in two months on Monday, pressured by a stronger U.S. dollar and a rally in the global financial markets. U.S. gold futures ended $1.30 lower at $1,278.90 an ounce. Spot gold was down 0.2 percent at $1,278 an ounce. The metal last week posted a weekly loss of 1.8 percent, its biggest such fall in a month, after it set a two-month low at $1,273.06 on Thursday, hurt by strong U.S. economic data and speculation of an early interest rate increase. The U.S. benchmark S&P breached the 2,000 mark for the first time as expectations that the European Central Bank would move to boost economic growth sent global financial markets shooting higher. "Equity markets continue to be strong, robbing gold of the opportunity to go higher", said HSBC precious metals analyst James Steel. The dollar gained, weighing on dollar-denominated commodities, as it makes them more expensive for holders of other currencies.

(Daily chart / 4-hourly chart below)

Gold August 26 at 00:10 GMT 1276.1 H: 1277.3 L: 1275.3

Gold Technical

S3S2S1R1R2R3
12751240-1330--

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

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

  • 12:30 US Durable goods orders (Jul)
  • 13:00 US FHFA House Price Index (Jun)
  • 13:00 US S&P Case-Shiller Home Price (Jun)
  • 14:00 US Consumer Confidence (Aug)

*All release times are GMT

Source: Gold - $1275 Level Stays True To Form