Gold – Takes a Breather Below $1225

Gold for Friday, October 10, 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 retained gains from a four-day rally on Friday and was headed for its best week in nearly four months as a slump in equities and growing worries over the global economy attracted safe-haven bids for the metal.  Spot gold was holding steady at $1,224.06 an ounce by 0035 GMT, after gaining for four straight sessions.  The metal has risen 2.8 percent for the week, its best since the week ended June 20, after recovering from a 15-month-low reached earlier this week.  Silver, platinum and palladium were all set to snap a five-week losing streak.  Wall Street stocks slumped 2 percent on Thursday on anxieties about global economic growth, while oil prices fell to a two-year low.  Earlier this week, the International Monetary Fund cut its global economic growth forecasts for the third time this year, warning of weaker growth in core euro zone countries, Japan and big emerging markets like Brazil.

(Daily chart / 4 hourly chart below)

Gold October 10 at 03:00 GMT   1221.7   H: 1225.2   L: 1222.1

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 Friday, Gold is easing back ever so slightly below $1225 after recently breaking through $1230 for the first time in a couple of weeks.  Current range: trading right around $1222.

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

Economic Releases

00:30 AU Housing/Lending Finance (Aug)

05:00 JP Consumer Confidence (Sep)

08:30 UK Construction Output (sa) (Aug)

08:30 UK Trade Balance (Non-EU) (Aug)

08:30 UK Visible Trade Balance (World) (Aug)

12:30 CA Unemployment (Sep)

12:30 US Import Price Index (Sep)

18:00 US Budget (Sep)

JP BoJ release minutes

US World Bank & International Monetary Fund Annual Meeting (to 12th)

WLD OPEC Monthly Oil Market Report

* 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.