Gold – Threatens to Remain Above Key $1200 Level

Gold for Friday, March 27, 2015

Throughout last week or so gold has moved very well and reversed by moving strongly off the support at $1150 up to a three week high right around $1220 level, before easing lower back towards the key $1200 level.  It has eased lower a little back near $1200 where it is presently consolidating and trading around. It still has its eyes firmly on the key $1200 level and it will be interesting to see whether it now receives some support from this level.  Prior to the recent move, gold remained quite steady enjoying strong support from the $1150 level whilst some eyes would have been looking lower. The next obvious technical support level lower is around $1130, and if it was to move through this level, then it would be trading at multi-year lows and looking very bearish. When gold broke through the rock solid support level at $1200 recently, it opened itself up to some potential downside which was played out a couple of weeks ago.  Throughout the second half of February gold enjoyed rock solid support from the key $1200 level which held it up on numerous occasions. For about a month gold drifted steadily lower down to a one month low near the key $1200 level before finding the solid support at this key level.

Gold has now undone all of its great work from earlier in the year which saw it surge to a five month high near $1308, before reversing and moving back to $1150. 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 rallied to a 3-1/2 week high on Thursday as escalating tensions in the Middle East knocked stocks and the dollar and drove investors into assets viewed as lower risk, such as bullion and German bonds.  U.S. stocks fell and oil prices leapt after Saudi Arabia and its Gulf Arab allies launched air strikes in Yemen to counter Iran-allied forces besieging the southern city of Aden.  Spot gold hit a peak of $1,219.40 an ounce and was up .7 percent at $1,203 an ounce. U.S. gold for April delivery settled $7.80 higher at $1,204.80.  “If the situation in the Middle East did not improve, prices could continue to rise, but otherwise they are likely to fall back below $1,200,” Commerzbank commodity analyst Daniel Briesemann said.  “Prices have soared 2 percent this morning on Yemen but in general underlying demand is not generated by risk events and fundamentally I don’t see a reason gold would move significantly in either direction in the short term.”  Gold was heading for a seventh session of gains, its longest winning streak since 2012. Soft U.S. data earlier this week boosted expectations that the Federal Reserve will keep interest rates low for the time being, lifting gold.

(Daily chart / 4 hourly chart below)

Gold March 26 at 23:50 GMT   1204.8   H: 1220   L: 1194.6

Gold Technical

S3

S2

S1

R1

R2

R3

1150

—

—

1200

1240

1300

During the early hours of the Asian trading session on Friday, Gold is trading in a narrow range right around $1205 after steadily moving higher over the last week or so. Current range: trading right above $1200 around $1205.

Further levels in both directions:

• Below: 1150.

• Above: 1200, 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 towards 70% as it rallied and steadied just above $1200. The trader sentiment is in favour of long positions.

Economic Releases

12:30 US Core PCE Price Index (3rd Est.) (Q4)

12:30 US GDP Annualised (3rd Est.) (Q4)

12:30 US GDP Price Index (3rd Est.) (Q4)

14:00 US Univ of Mich Sent. (Final) (Mar)

* 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.