Gold – Remaining Steady Around Resistance at $1200

Gold for Wednesday, November 26, 2014

Over several days last week Gold made repeated runs at the resistance level at $1200 and failed every time, before finishing the week breaking through ever so slightly.  For all of this week gold has been trading right around the key $1200 level as it attempts to make a move above and maintain a break.   In the last few weeks Gold has enjoyed a strong resurgence back to the key $1200 level where it has met stiff resistance. 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.

As to be expected, the key $1200 level is likely to play a role and provide reasonable resistance. 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 eased back towards 55% as gold has rallied back up to the resistance level at $1200 again.

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 edged up to around $1,200 an ounce on Tuesday after better-than-expected U.S. economic growth data boosted the dollar only briefly and as the market looked to a Swiss referendum on central bank gold reserves for more trading cues.  A right-wing Swiss party called the Nov. 30 vote, aiming to prevent the Swiss National Bank from offloading its gold holdings and obliging it to hold at least 20 percent of its assets in gold, compared with 8 percent last month.  While opinion polls showed that support among Swiss voters for the initiative was fading, a ‘yes’ vote could boost prices in the longer term, traders said. The spot gold price fell to a 4-1/2-year low earlier this month.  “The polls indicate that a ‘yes’ vote is unlikely … however, if it happens, we could see a short-lived reaction in the price of gold, but it’s not like other central banks will follow, because it wasn’t a central bank decision,” Natixis analyst Bernard Dahdah said.  Spot gold was flat at $1,198 an ounce, not far from a three-week high of $1,207.70 reached on Friday after a surprise rate cut in top consumer China.

(Daily chart / 4 hourly chart below)

Gold November 25 at 22:50 GMT   1200.8   H: 1203.1   L: 1190.4

Gold Technical

S3

S2

S1

R1

R2

R3

1140

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—

1200

1255

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During the early hours of the Asian trading session on Wednesday, Gold is trying to get back above the key $1200 level after finishing strongly last week. Current range: trading right around $1200.

Further levels in both directions:

• Below: 1140.

• 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 steadied just below resistance at $1200.  The trader sentiment is in favour of long positions.

Economic Releases

00:30 AU Construction Work Done (Q3)

09:30 UK GDP (2nd Est.) (Q3)

09:30 UK Index of Services (Sep)

13:30 US Core PCE Price Index (Oct)

13:30 US Durable goods orders (Oct)

13:30 US Durables ex transport (Oct)

13:30 US Initial Claims (22/11/2014)

13:30 US Personal Income & Spending (Oct)

14:45 US Chicago PMI (Nov)

14:55 US Univ of Mich Sent. (Final) (Nov)

15:00 US New Home Sales (Oct)

15:00 US Pending Home Sales (Oct)

* All release times are GMT

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