Gold - Returns To Short-Term Resistance Around $1330

by: Dean Popplewell

By Stuart McPhee

Gold for Thursday, July 10, 2014

In recent hours gold has made another attempt to push higher back up toward the resistance area around $1330 before easing off slightly. After pushing higher to a three-month high above $1330 last week, it then spent a few days easing lower back to below $1320 and showing more signs of indecision again after doing it a lot over the last few weeks. After several days of classic signs of indecision with its multiple doji candlestick patterns on the daily chart a couple of weeks ago, gold pushed higher before experiencing further indecision just under $1330 before easing lower. A few weeks ago gold enjoyed a stunning surge higher to break through some key levels along its way to reaching a then two-month high just above $1320 and immediately after it eased away ever so slightly and consolidated with its flow of doji patterns. It was also able to break through the $1300 level and this level is likely to play a role again should gold ease lower, which is likely. If sellers do take advantage of these relatively higher prices which will most likely bring the $1300 level back into play. The OANDA long position ratio has dropped to its lowest level in a few months around 51% showing a much more bearish sentiment than the long-term average.

A few weeks ago 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 two-month high. After moving so little for an extended period, gold dropped sharply several weeks ago 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 recent rally higher. Prior to the strong fall a few weeks ago gold had remain fixated on the $1293 level and had done very little as volatility has dried up completely resulting in gold moving very little. 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.

Over the last few months 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.

Spot gold extended earlier gains on Wednesday after the minutes of the Federal Reserve's most recent policy meeting showed the central bank has begun detailing how it plans to ease the U.S. economy out of an era of loose monetary policy. The minutes from the June 17-18 meeting indicate the Fed envisions using its overnight repurchase agreements in tandem with the interest it pays banks on excess reserves to set a ceiling and floor for its target interest rate. Though no decisions have been announced, the discussion has become detailed enough for Fed officials to contemplate the proper spread between the two - mentioned in the minutes as 20 basis points. After the announcement, spot gold rose 0.8% to $1,329 an ounce. U.S. gold futures for August delivery settled $7.80 higher at $1,324.30 an ounce, logging its first daily gain in four sessions.

(Daily chart / 4-hourly chart below)

Gold July 10 at 00:45 GMT 1326.8 H: 1328.5 L: 1324.4

Gold Technical

S3 S2 S1 R1 R2 R3
1240 - - 1330 - -

During the early hours of the Asian trading session on Thursday, gold is easing lower under $1330 after surging higher towards that level again in recent hours. Current range: trading right around $1327.

Further levels in both directions:

• Below: 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 dropped down below 50% for the first time in a long time as it started to edge higher again towards $1330. The trader sentiment has shifted to in favour of short positions.

Economic Releases

  • 01:30 AU Unemployment (Jun)
  • 05:00 JP Consumer Confidence (Jun)
  • 08:30 UK Trade Balance (May)
  • 11:00 UK BoE MPC - APF Total (Jul)
  • 11:00 UK BoE MPC - Base Rate (Jul)
  • 12:30 CA House Price Index (May)
  • 12:30 US Initial Claims (05/07/2014)
  • 14:00 US Wholesale Inventories (May)

*All release times are GMT

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