Gold – Easing Back to Key $1240 Level

Gold for Wednesday, February 4, 2015

Since the beginning of this year gold has enjoyed a very solid few weeks which has seen it surge to a five month high near $1308, before easing back over the last couple of weeks back down below $1260.  It A couple of weeks ago gold eased back a little and steadied below the $1280 level after surging to that area and a four month high, before its recent strong surge higher. Over the last month gold has been on the move as it has been able to rally strongly from around $1170 back through the key $1200 level and to a 12 week high just above the $1240 level before its further surge higher in the last few weeks. Despite this recent break, the $1240 level remains key as it has provided plenty of resistance over the last few months and is now likely to play a role should gold retreat back to it.

At the beginning of December gold eased lower away from the resistance level at $1240 yet again back down to below $1200. During the second half of November gold made repeated runs at the resistance level at $1200 failing every time, before finally breaking through strongly. Throughout the first half of November Gold enjoyed a strong resurgence back to the key $1200 level where it has met stiff resistance up until recently. 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.

Gold was steady but failed to rebound on Wednesday after falling more than 1 percent in the previous session as Greece’s plan to end a standoff with creditors lifted the appetite for risky assets such as equities.  Spot gold was little changed at $1,260.86 an ounce by 0018 GMT, after falling 1.2 percent on Tuesday. That marked gold’s fourth drop in five sessions.  U.S. gold for April delivery was also nearly flat at $1,261.50 an ounce.  Greece’s new government dropped calls for a write-off of its foreign debt and proposed ending a standoff with its official creditors by swapping the debt for growth-linked bonds.  New orders for U.S. factory goods fell for a fifth straight month in December, but a smaller-than-previously reported drop in business spending plans supported views of a rebound in the months ahead.  The world’s largest gold-backed exchange-traded fund, SPDR Gold Trust, said its holdings slipped to 24.59 million ounces on Tuesday from 24.65 million ounces the day before, which was the highest level since October.

(Daily chart / 4 hourly chart below)

Gold February 4 at 02:30 GMT   1261.2   H: 1263.2   L: 1256.7

Gold Technical

S3

S2

S1

R1

R2

R3

1240

1200

1170

1300

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During the early hours of the Asian trading session on Wednesday, Gold is trading in a very narrow range right around $1260. Current range: trading right below $1280.

Further levels in both directions:

• Below: 1240, 1200 and 1170.

• Above: 1300.

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 well above 60% as it has eased back away from the five month high near $1300 in the last week or so.  The trader sentiment is in favour of long positions.

Economic Releases

09:00 EU Composite PMI (Jan)

09:00 EU Services PMI (Jan)

09:30 UK CIPS/Markit Services PMI (Jan)

10:00 EU Retail Trade (Dec)

13:15 US ADP Employment Survey (Jan)

15:00 CA Ivey PMI (Jan)

15:00 US ISM Non-Manufacturing (Jan)

* 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.

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