Gold - Trying To Edge Higher From Support At $1275

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

By Stuart McPhee

Gold for Thursday, August 28, 2014

Over the last couple of days gold has been enjoying a small rally off the support level at $1275 after spend the best part of the last week resting on support there. In the week prior, gold had 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. 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 futures settled lower on Wednesday, but spot prices rose as a weaker dollar and lingering geopolitical tensions helped offset selling pressure from a record rally in U.S. equities. Spot gold was up 0.2 percent at $1,283 an ounce, while U.S. gold futures for December delivery underperformed spot, falling $1.80 on the day to close at $1,283.40 an ounce. The dollar softened as traders focused on riskier assets, while speculation the European Central Bank will resort to monetary stimulus also triggered some interest in bullion, traders said. On Wednesday, Ukraine accused Russian forces of launching a new military incursion across its border, a day after the leaders of both countries agreed to work toward ending a separatist war in the east of the country. "The numerous sources of geopolitical crisis are evidently preventing the gold price from slumping," said Eugen Weinberg, head of commodity research at Commerzbank.

(Daily chart / 4 hourly chart below)

Gold August 28 at 00:45 GMT 1284 H: 1287.6 L: 1280.1

Gold Technical

S3 S2 S1 R1 R2 R3
1275 1240 - 1290 1330 -
Click to enlarge

During the early hours of the Asian trading session on Thursday, gold is trading in a narrow trading range around $1283 after remaining quite steady for the last couple of days. Current range: trading right around $1284.

Further levels in both directions:

• Below: 1275 and 1240.

• Above: 1290 and 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

  • 23:30 (Wed) UK GfK Consumer Confidence (Aug)
  • 23:30 (Wed) JP CPI Core (Nation) & (Tokyo) (Jul)
  • 23:30 (Wed) JP Real Household Spending (Jul)
  • 23:30 (Wed) JP Unemployment (Jul)
  • 23:50 (Wed) JP Industrial Production (Prelim.) (Jul)
  • 23:50 (Wed) JP Large Retailers Sales (Jul)
  • 23:50 (Wed) JP Retail Sales (Jul)
  • 01:30 AU Capital Expenditure (Q2)
  • 08:00 EU M3 Money Supply (Jul)
  • 09:00 EU Business Climate Index (Aug)
  • 09:00 EU Consumer Sentiment (Aug)
  • 09:00 EU Economic Sentiment (Aug)
  • 09:00 EU Industrial Sentiment (Aug)
  • 12:30 CA Current Account (Q2)
  • 12:30 US Core PCE Price Index (2nd Est.) (Q2)
  • 12:30 US GDP Annualised (2nd Est.) (Q2)
  • 12:30 US GDP Price Index (2nd Est.) (Q2)
  • 12:30 US Initial Claims
  • 14:00 US Pending Home Sales (Jul)
  • EU General Affairs Ministers Hold Meeting in Italy (to 29th)

*All release times are GMT