Gold – Support at $1215 Stands Firm

Gold for Friday, September 26, 2014

For most of this week Gold has enjoyed support at $1215 after finishing last week falling strongly from $1240 to just below $1215. After finding some support around $1225 for a few days to start last week which saw it rally back close to $1240, Gold then fell sharply to its lowest level since January this year. The next obvious level of potential support is at $1200 which is a long term key level.  If gold was to fail at this level, then it is likely the flood gates will open and the shine will have definitely worn off. 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. Over the last month or so the $1290 level has shown some signs of support and held gold up until its recent sharp decline. 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 below 70% again as gold rallies a little and finds support at $1215. 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 prices settled higher on Thursday after softer than expected U.S. data pulled the dollar from an earlier four-year and U.S. stock indexes fell to multi-week lows.  U.S. gold futures for December delivery settled $2.40 higher at $1,221.90 an ounce.  Spot gold was at $1,223 an ounce, up 0.5 percent, after hitting a low of $1,206.85 an ounce earlier, its weakest since Jan. 2.  The U.S. unit pared loses after U.S. services PMI and durable goods data came in softer than expected, having earlier surged on expectations that U.S. and European monetary policies are parting ways.  Gold prices may be prone to a reversal after falling nearly 6 percent this month, analysts said.  “The market has now built up quite a big short, so it will require some additional price-negative news to attract further selling through key support below, and at the moment, I cannot see where that should be coming from,” Saxo Bank analyst Ole Hansen said.  “We saw a quick spike on Friday and that goes to show that the shorts are beginning to worry that we may see a speculative washout, taking the price back up towards 1,250, before it probably becomes a sell once again,” Hansen added.

(Daily chart / 4 hourly chart below)

Gold September 26 at 00:30 GMT   1222.9   H: 1223.1   L: 1215.8

Gold Technical

S3

S2

S1

R1

R2

R3

1215

1200

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1290

1330

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During the early hours of the Asian trading session on Friday, Gold is rallying a little higher above $1220 after surging strongly in the last 12 hours or so.  Current range: trading right around $1223.

Further levels in both directions:

• Below: 1215 and 1200.

• 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 below 70% again as gold rallies a little and finds support at $1215. The trader sentiment is strongly in favour of long positions.

Economic Releases

12:30 US Core PCE Price Index (3rd Est.) (Q2)

12:30 US GDP Annualised (3rd Est.) (Q2)

12:30 US GDP Price Index (3rd Est.) (Q2)

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

* All release times are GMT

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.