Gold – Drops Sharply Below $1150 with Eyes on $1130

Gold for Monday, December 1, 2014

After making repeated runs at the resistance level at $1200 and failing every time, gold has now fallen sharply away.  It is now eyeing off the previous support level around $1130 which may play a role and prop it up again.   It wouldn’t be surprising to see $1130 seriously tested and potentially broken.  In the last few weeks Gold has enjoyed a strong resurgence back to the key $1200 level where it has met stiff resistance, before its recent sharp decline.  Throughout the second half of October gold fell very strongly and resumed the medium term down trend falling from above $1250 back down through the key $1240 level, down below $1200 to a multi year low near $1130. It spent a few days consolidating around $1160 after the strong fall which has allowed it to rally higher in the last couple of weeks. Earlier in October Gold ran into the previous key level at $1240, however it also managed to surge higher to a five week high at $1255.

In late August Gold enjoyed 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. 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, around $1320 and $1330. The OANDA long position ratio for Gold has moved back towards the 50% level as gold has fallen sharply back to around $1150.

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.

Gold slid 2 percent on Monday and silver slumped to its lowest since 2009 after Swiss voters overwhelmingly rejected a proposal to boost central bank gold reserves, providing a new trigger for sell-offs in an already nervous market.  The “Save our Swiss gold” initiative, which would have compelled the Swiss National Bank to boost its gold reserves to 20 percent of its assets from around 8 percent currently, was rejected by 77 percent of voters.  Spot gold dropped as far as $1,142.91 an ounce, its lowest since early November when it marked a 4-1/2 year low of $1,131.85. It was down 1.6 percent at $1,148.01 by 0107 GMT.  U.S. gold futures declined nearly 3 percent and silver futures tumbled 9 percent, before recovering slightly.  “A ‘no’ was expected but there was probably a risk premium factored in. That’s why we are seeing this liquidation today,” said a Sydney-based precious metals trader.

(Daily chart / 4 hourly chart below)

Gold December 1 at 02:00 GMT   1152.1   H: 1167.1   L: 1142.8

Gold Technical

S3

S2

S1

R1

R2

R3

1130

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1200

1255

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During the early hours of the Asian trading session on Monday, Gold is trying to consolidate and stop the bleeding after falling sharply back to $1150 to start the new week.  Current range: trading right around $1150.

Further levels in both directions:

• Below: 1130.

• Above: 1200 and 1255.

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 the 50% level as gold has fallen sharply back to around $1150.  The trader sentiment is in now quite even between long and short positions.

Economic Releases

05:00 JP Vehicle Sales (Nov)

08:00 UK Halifax House Price Index (1st-5th) (Nov)

09:00 EU Manufacturing PMI (Nov)

09:30 UK BoE – Mortgage Approvals (Oct)

09:30 UK BoE – Net Consumer Credit (Oct)

09:30 UK BoE – Secured Lending (Oct)

09:30 UK CIPS/Markit Manufacturing PMI (Nov)

09:30 UK M4 Money Supply (Oct)

14:00 EU Euro-Area Finance Chiefs Discuss National Budgets in Brussels

14:45 US Manufacturing PMI (Nov)

15:00 US ISM Manufacturing (Nov)

* All release times are GMT

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