Gold – Trying to Rally Back to Key $1240 Level

Gold for Monday, February 16, 2015

Over the course of the last three weeks gold has drifted steadily lower down to a one month low around $1220 before rallying a little higher back towards $1230 to finish last week.   This down move resulted in a one month low below $1220.  It now has eyes on the $1240 level again where it is likely to meet some resistance.  With the exception of the last few weeks, gold has enjoyed a very solid few weeks to start the year which has seen it surge to a five month high near $1308, before reversing and moving back under $1240 over the last couple of weeks. It presently finds itself trading in a narrow range right around $1240. A few 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.

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 rose one percent on Friday, erasing a week of losses, as the dollar dropped on weaker than expected U.S. economic data.  Spot gold rose to a session high of $1,234.60 an ounce and was up 0.5 percent at $1,228 an ounce.  U.S. gold for April delivery edged up $9 at $1,229 an ounce. The United States was on a national holiday on Monday.  “We have the long weekend in the U.S., so we may continue to see some book-squaring throughout the day ahead of that,” MKS SA head of trading Afshin Nabavi said.  “We are in a holding pattern between $1,150 and $1,300 because there isn’t enough clarity around when the Fed is going to be hiking interest rates and what is going to be happening with Greece,” ING Bank senior strategist Hamza Khan said.  A weaker dollar supports gold by making the dollar-denominated asset cheaper for holders of other currencies.  But outlook for the dollar remained upbeat despite the current pause in its long-term rally, as many investors continued to price in an interest rate hike by the Federal Reserve some time this year.

(Daily chart / 4 hourly chart below)

Gold February 15 at 23:40 GMT   1228.5   H: 1229.9   L: 1227.5

Gold Technical

S3

S2

S1

R1

R2

R3

1200

1170

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1240

1300

—

During the early hours of the Asian trading session on Monday, Gold is trading in a narrow range right below $1230 after remaining quite steady to finish out last week.  Current range: trading right below $1230 around $1229.

Further levels in both directions:

• Below: 1200 and 1170.

• Above: 1240 and 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 above 65% as it has eased back below $1240. The trader sentiment is in favour of long positions.

Economic Releases

00:01 UK Rightmove House Price Index (Feb)

00:30 AU New motor vehicle sales (Jan)

04:30 JP Capacity Utilisation (Dec)

04:30 JP Industrial Production (Final) (Dec)

14:00 EU Euro-Area Finance Ministers Meet in Brussels

* 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.