Gold – Makes Another Run at Resistance at $1240

Gold for Thursday, October 16, 2014

Over the last couple of days Gold has run into the previous key level at $1240 which has resisted and forced gold a little lower, however in the last 24 hours it has rallied and surged through to reach four week high in the process.  For the last few weeks Gold has enjoyed solid support at $1215 after falling strongly a couple of weeks ago from $1240 to just below $1215, however a couple of weeks ago it dropped to its lowest level in 2014 near $1180. In the last week or so since however gold has rallied higher and returned to back above $1230 again and the resistance level at $1240.  Should gold retrace again, the next obvious level of potential support remains at $1200 which is a long term key level. 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 towards 60% as gold has returned to the resistance level at $1240.  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.

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 are now distant memories however may play another role 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 $1200.

Gold touched a one-month high on Wednesday after soft U.S. data knocked the dollar lower against a basket of currencies and weighed on stock markets, boosting the metal’s appeal as an alternative asset.  A recovery in the dollar had prevented gold from gaining traction after it rebounded last week from its lowest since mid-2013. The dollar’s slide on Wednesday helped gold push back to a peak of $1,249.30 an ounce, its highest since Sept. 11.  Spot gold was up 0.7 percent at $1,241 an ounce, while U.S. gold futures for December delivery settled up $10.50 an ounce at $1,244.80 in unusually heavy trading volume, preliminary Reuters data showed.  “It’s really economic news and the dollar that predominate for gold,” Sharps Pixley Chief Executive Ross Norman said. “We’re seeing a fade on economic growth across the board, particularly in Europe … There are some serious concerns creeping in about disinflation.”  The dollar hit session lows against the yen, euro and Swiss franc after data for September showed U.S. retail sales eased and U.S. producer prices fell for the first time in over a year, a potentially worrisome sign for the economy.

(Daily chart / 4 hourly chart below)

Gold October 16 at 00:05 GMT   1240.7   H: 1242.2   L: 1238.8

Gold Technical

S3

S2

S1

R1

R2

R3

1200

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1240

1290

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During the early hours of the Asian trading session on Thursday, Gold is just easing back to the resistance level at $1240 after recently making its way through that level continuing to ease away slightly from the resistance level at $1240 after getting close in the last day or so. Current range: trading right around $1235.

Further levels in both directions:

• Below: 1200.

• Above: 1240 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 moved back towards 60% as gold has returned to the resistance level at $1240.  The trader sentiment is strongly in favour of long positions.

Economic Releases

09:00 EU Trade Balance (sa) (Aug)

09:00 EU HICP (Sep)

12:30 CA Manufacturing sales (Aug)

12:30 US Initial Claims (11/10/2014)

13:15 US Capacity utilisation (Sep)

13:15 US Industrial production (Sep)

14:00 US NAHB Builders survey (Oct)

14:00 US Philadelphia Fed Survey (Oct)

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

* 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.