Gold – Rallies Higher to $1225

Gold for Thursday, October 9, 2014

For the best part of the last couple of weeks Gold has thoroughly enjoyed solid support at $1215 after falling strongly a couple of weeks ago from $1240 to just below $1215, however a week ago it dropped to its lowest level in 2014 near $1180.  In the last few days however gold has rallied higher and returned to back above $1225.  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 up to 65% as gold has rallied back above $1220. 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 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 climbed to its highest in nearly two weeks on Thursday as expectations of an early hike in U.S. interest rates eased and the dollar lost traction after the release of minutes of the last Federal Reserve policy meeting.  Spot gold rose to $1,223.61 an ounce early on Thursday, before paring gains to trade down 0.2 percent at $1,219.30 by 0036 GMT. The metal had risen for three days in a row before Thursday.  U.S. gold futures jumped over 1 percent to $1,224.30 – also close to a two-week peak, while silver futures rose nearly 2 percent.  Fed officials want to tie an interest-rate rise to U.S. economic progress, but the minutes of their last policy meeting show they are struggling with how to come to grips with the dual threats of a stronger dollar and a global slowdown.  The minutes of the Sept. 16-17 meeting, released on Wednesday, expressed concern the rising dollar could slow a needed rebound in inflation, and also highlighted economic turmoil in Europe and Asia.  The minutes prompted investors to bet that the Fed is in no rush to tighten after years of monetary stimulus.

(Daily chart / 4 hourly chart below)

Gold October 9 at 03:15 GMT   1224   H: 1225.7   L: 1219

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 rallying higher and pushing back above $1225 after enjoying some recent support.  Current range: trading right around $1224.

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 up to 65% as gold has rallied back above $1220.  The trader sentiment is strongly in favour of long positions.

Economic Releases

23:50 (Wed) JP METI Tertiary activity index (Aug)

23:50 (Wed) JP Bank Lending Data (Sep)

00:30 AU Unemployment (Sep)

11:00 UK BoE MPC – APF Total (Oct)

11:00 UK BoE MPC – Base Rate

12:30 CA House Price Index (Aug)

12:30 US Initial Claims (04/10/2014)

14:00 US Wholesale Inventories (Aug)

NZ REINZ House Price Index (9th-14th) (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.