Gold – Eases Back Towards Support Around $1220

Gold for Tuesday, May 19, 2015

Gold enjoyed a solid week last week surging to a three month high above $1225 towards the end of last week.  It has since consolidated a little and is now remaining steady above $1220. A couple of weeks ago gold enjoyed support at $1180 which allowed it to rally back to $1190 and beyond to resistance at $1200. A few weeks ago Gold fell sharply back down through the key $1200 level down to below another support level around $1180, before dropping further to a six week low below $1170. To start that week Gold was trying to rally higher and regain lost ground from the end of the previous week which saw it drop to near $1175. Over the last couple of months Gold has had an attraction to the key $1200 level as every time it ventures away it returns quickly to trade right around it.

Back at end of March gold eased a little for a few days to below $1185, although for the best part of the last few weeks gold has moved strongly off the support at $1150 and then found some new support from the $1200 level. 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. 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 retained gains from a five-day rally on Tuesday, trading near a three-month high as a recent string of sluggish U.S. economic data stoked speculation the Federal Reserve would not raise rates any time soon.  Spot gold had dipped slightly to $1,223.39 an ounce by 0030 GMT, but held near a three-month high of $1,232.20 reached in the previous session.  The metal had gained for five straight days to Monday after recent data on U.S. jobs market, retail sales and consumer sentiment pointed to weakness in the economy.  The weak data bolstered views the economy was not recovering strongly enough for the U.S. central bank to raise rates from record lows at its next policy meeting in June.  That view has supported non-interest-paying bullion, which would have seen demand decline with higher rates.  However, Chicago Fed President Charles Evans noted that the Fed could look at a rate hike in June if the economy was strong enough.  The U.S. economy is probably not as weak as current estimates suggest, a paper published Monday by the Federal Reserve Bank of San Francisco said, potentially adding to arguments for raising interest rates sooner rather than later.

(Daily chart / 4 hourly chart below)

Gold May 19 at 03:10 GMT   1222.2   H: 1226.1   L: 1220.5

Gold Technical

S3

S2

S1

R1

R2

R3

1180

1150

—

1240

1300

—

During the early hours of the Asian trading session on Tuesday, Gold is consolidating right above $1220 after its recent surge higher. Current range: trading right above $1220.

Further levels in both directions:

• Below: 1180 and 1150.

• 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 to above 60% as it has eased back towards $1220.  The trader sentiment is strongly in favour of long positions.

Economic Releases

23:50 (Mon) JP GDP (Prelim.) (Q1)

01:30 AU RBA minutes released

03:00 NZ RBNZ Infl ation Expectations (Q2)

08:30 UK CPI (Apr)

08:30 UK Input & Output Prices (unadj.) (Apr)

08:30 UK ONS House Prices (Mar)

09:00 EU HICP (Apr)

09:00 EU Trade Balance (sa) (Mar)

09:00 EU ZEW (Economic Sentiment) (May)

12:30 US Building Permits (Apr)

12:30 US Housing Starts (Apr)

* All release times are GMT

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