Gold – Drops Sharply Below $1200

Gold for Friday, October 31, 2014

In the last week gold has resumed the medium term down trend falling from above $1250 back down through the key $1240 level and down below $1200 in recent hours.  A couple of weeks ago Gold ran into the previous key level at $1240, however it also managed to surge higher to a five week high at $1255 early last week. In the last few days to finish last week however it fell strongly back down below the $1240 level and to near $1226 before rallying a little higher and steadying around the $1230 level. In the last 48 hours it has fallen strongly. After enjoying some solid support at $1215 for a couple of weeks, gold dropped to its lowest level in 2014 near $1180 earlier this month.

The next obvious level of potential support remains at $1200 which is a long term key level, and where gold is presently trading.  Several weeks ago Gold was enjoying 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. This happened around $1320 and $1330. The OANDA long position ratio for Gold has moved back to above 65% as gold has fallen back down through the $1240 level.

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.

Gold settled at its lowest level in nearly 4 weeks on Thursday after the Federal Reserve ended its bond-buying stimulus program with unexpectedly upbeat comments about the economy.  U.S. December gold futures ended $26.30, or 2.2 percent, lower at $1,198.60 an ounce, its lowest close since October 3.  Meanwhile, spot gold was down 1 percent at $1,199 an ounce and silver tumbled to its lowest price since March 2010 at $16.45.  The Fed statement on Wednesday, coupled with unexpectedly strong third-quarter U.S. economic growth data, sent the dollar to its highest since Oct. 6, while U.S. interest rate futures shifted to show better-than-even chances of a rate rise next September. Previously, they had indicated a rise in October.  That dented interest in gold, which as a non-yielding asset tends to benefit from ultra-low rates.  The U.S. central bank largely dismissed financial market volatility, a slowdown in Europe and a weak inflation outlook as factors that might limit progress towards its unemployment and inflation goals.

(Daily chart / 4 hourly chart below)

Gold October 30 at 22:50 GMT   1200   H: 1216.8   L: 1196.1

Gold Technical

S3

S2

S1

R1

R2

R3

1200

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—

1255

1290

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During the early hours of the Asian trading session on Friday, Gold is trying to rally back and hold onto the $1200 level after falling so sharply in the last couple of days.  Current range: trading right around $1200.

Further levels in both directions:

• Below: 1200.

• Above: 1255 and 1290.

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 surged back up to near 68% as gold has dropped sharply back down below $1200. The trader sentiment is strongly in favour of long positions.

Economic Releases

00:05 UK GfK Consumer Confidence (Oct)

04:00 JP Housing starts (Sep)

04:00 JP Construction orders (Sep)

10:00 EU Flash HICP/ Core (Oct) (y/y)

10:00 EU Unemployment (Sep)

12:30 CA GDP (Aug)

12:30 US Personal income & spending (Sep)

12:30 US Core PCE Price Index (Sep)

13:45 US Chicago PMI (Oct)

13:55 US Univ of Mich Sent. (Final) (Oct)

JP BoJ Monetary Policy meeting

JP BoJ Publication of Outlook Report

* All release times are GMT

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