Gold Steadies Above Key $1200 Level

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

By Stuart McPhee

Gold for Thursday, December 4, 2014

After making repeated runs at the resistance level at $1200 and failing every time, gold fell sharply to start this week before spending the last few days recovering well and moving back above the key $1200 level. In doing so, it reached a new one month high above $1220 in the process. Over the last 48 hours it has eased back and gravitated to the key $1200 level again. In the last few weeks gold has enjoyed a strong resurgence back to the key $1200 level where it has met stiff resistance up until recently. Throughout the second half of October gold fell very strongly and resumed the medium term down trend falling from above $1250 back down through the key $1240 level, down below $1200 to a multi year low near $1130. It spent a few days consolidating around $1160 after the strong fall which has allowed it to rally higher in the last couple of weeks. Earlier in October gold ran into the previous key level at $1240, however it also managed to surge higher to a five week high at $1255.

In late August gold enjoyed a resurgence as it moved strongly higher off the support level at $1275, however it then ran into resistance at $1290. 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. 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, around $1320 and $1330. The OANDA long position ratio for gold has moved back towards the 50% level as gold has fallen sharply back to around $1150.

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.

As gold traders often track the cost of oil, which can impact consumer costs and inflation, a whipsaw in crude futures is spurring the biggest price swings for bullion in almost nine months. Adding to the pain for investors in the metal is a dollar rally that's curbing demand for alternative assets. While gold dropped to a four-year low last month as investors saw less need for a store of value, prices surged on December 1 by the most in 14 months when oil rebounded from a five-year low. Both commodities resumed declines yesterday, and then rose together today. U.S. inflation expectations, measured by the five-year Treasury break-even rate, fell 24 percent this year, set for the biggest decline since 2008. "Gold has been swinging along with oil prices in the past few sessions," Atul Lele, who helps oversee $5.1 billion as the chief investment officer at Bahamas-based Deltec International Group, said yesterday in a telephone interview. "There are far too many negative factors pushing gold down, and the volatility that we saw because of oil will not lead to any upside in prices."

(Daily chart / 4 hourly chart below)

Gold December 4 at 01:50 GMT 1208.6 H: 1210.7 L: 1206.8

Gold Technical

S3 S2 S1 R1 R2 R3
1130 - - 1200 1255 -

During the early hours of the Asian trading session on Thursday, gold is trading right above $1200 after easing back over the last 48 hours. Current range: trading right around $1208.

Further levels in both directions:

• Below: 1130.

• Above: 1200 and 1255.

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 back above 50% again as gold has eased back to the key $1200 level. The trader sentiment is ever so slightly in favour of long positions.

Economic Releases

  • 22:30 (Wed) AU AIG Construction PMI (Nov)
  • 00:30 AU Retail trade (Oct)
  • 00:30 AU Trade Balance (Oct)
  • 12:00 UK BoE MPC - APF Total (Dec)
  • 12:00 UK BoE MPC - Base Rate
  • 12:45 EU ECB - Interest Rates
  • 13:30 EU ECB's Draghi gives press conference following rate announcement
  • 13:30 US Initial Claims (29/11/2014)
  • 15:00 CA Ivey PMI (Nov)

* All release times are GMT