Gold – Drops Sharply to Near $1210

Gold for Thursday, October 30, 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 $1210 in recent hours.   It eyes are again focused on the $1200 level.   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 24 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.  It will be interesting to see whether the support level at $1215 can be called upon again and provide some much needed support to gold to stop it falling back down below $1200 again.

The next obvious level of potential support remains at $1200 which is a long term key level, should gold retrace again. 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 was languishing near a three-week low on Thursday after the U.S. Federal Reserve ended its bond-buying stimulus program and expressed confidence in the economic recovery, dimming bullion’s safe-haven appeal.  Spot gold was little changed at $1,212.60 an ounce by 0031 GMT. In the previous session, gold fell to $1,208.26 – its lowest since Oct. 8, before closing down 1.3 percent.  U.S. gold futures slid about 1 percent to $1,212.80 on Thursday, tracking losses in spot gold.  The Fed on Wednesday ended its monthly bond purchase program and dropped a characterization of U.S. labor market slack as “significant” in a show of confidence in the economy’s prospects.  In a statement after a two-day meeting, the central bank largely dismissed recent financial market volatility, dimming growth in Europe and a weak inflation outlook as unlikely to undercut progress towards its unemployment and inflation goals.  Gold, often seen as an alternative investment during economic and financial uncertainties, fell on fears that the vote of confidence in the recovery could prompt the Fed to raise interest rates soon. Bullion, as a non-interest-bearing asset, could take a hit when higher rates are in place.

(Daily chart / 4 hourly chart below)

Gold October 30 at 01:50 GMT   1214.5   H: 1216.8   L: 1210.7

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 Thursday, Gold is trying to rally back above $1215 after falling so sharply in the last 12 hours or so.  Current range: trading right around $1215.

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 $1210.  The trader sentiment is strongly in favour of long positions.

Economic Releases

21:45 (Wed) NZ Building Permits (Sep)

22:30 (Wed) JP CPI Core (Nation/ Tokyo) (Sep)

22:30 (Wed) JP Real Household Spending (Sep)

22:30 (Wed) JP Unemployment (Sep)

23:30 (Wed) AU PPI (Q3)

23:30 (Wed) AU Private Sector Credit (Sep)

10:00 EU Business Climate Index (Oct)

10:00 EU Economic/Industrial/Consumer Sentiment (Oct)

12:30 US Core PCE Price Index (1st Est.) (Q3)

12:30 US GDP Annualised & Price Index (1st Est.) (Q3)

12:30 US Initial Claims (25/10/2014)

* All release times are GMT

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