Gold – Taking a Breather Just Below $1240

Gold for Tuesday, September 16, 2014

Over the last couple of days to start this week Gold has been able to find some support and consolidate around the $1230 level after falling heavily over the last few weeks to an eight month low below $1226.   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. A few 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 eased back towards 70% as gold has settled above $1230. 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 clung to small overnight gains on Tuesday but investors refrained from taking big positions in the metal as they waited for the start of a Federal Reserve policy meeting for clues on when the U.S. central bank could raise interest rates.  Spot gold was little changed at $1,233.20 an ounce by 0025 GMT. The metal hit an eight-month low of $1,225.30 in the previous session, before paring losses to close up 0.4 percent on weaker equities.  Investors are watching the Fed’s words closely for any clues on the timing of the first U.S. rate hike in more than eight years. Any hike in interest rates would dim the appeal of gold, a non-interest bearing asset.  The Fed will begin its two-day policy meet later in the day, with an announcement expected on Wednesday.  The dollar, which has been strengthening recently in anticipation of an earlier-than-expected rate hike, is also being keenly watched as any further gains would hurt gold.  Holdings at the world’s largest silver-backed exchange-traded funds rose to a record high as a pullback in prices prompted long-term retail investors to increase purchases of the precious metal.

(Daily chart / 4 hourly chart below)

Gold September 16 at 03:15 GMT   1236.9.3   H: 1238.6   L: 1232.3

Gold Technical

S3

S2

S1

R1

R2

R3

1200

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1290

1330

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During the early hours of the Asian trading session on Tuesday, Gold is rallying a little higher after falling to an eight month low around $1225, and looks poised to visit the $1240 level again.  Current range: trading right around $1237.

Further levels in both directions:

• Below: 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 eased back towards 70% as gold has settled above $1230.  The trader sentiment is strongly in favour of long positions.

Economic Releases

22:45 (Mon) NZ Current Account (Q2)

08:30 UK CPI (Aug)

08:30 UK Input & Output Prices (Aug)

08:30 UK ONS House Prices (Jul)

09:00 EU Labour Cost Index (Q2)

09:00 EU ZEW (Economic Sentiment) (Sep)

12:30 CA Manufacturing sales (Jul)

12:30 US PPI (Aug)

20:00 US Net Long-term TICS Flows (Jul)

AU RBA minutes released

US Federal Reserve FOMC meeting (to 17th)

* All release times are GMT

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