Gold: Drops Through Key Level, Hits One Month Low

Gold for Thursday February 12, 2015

To close out last week, gold moved sharply lower back to the key $1240 level and then to a three week low just below $1230. To start this week it has rallied a little higher and spent a couple of days consolidating around the key $1240 level before falling sharply over the last 24 hours down to a one month low below $1220.

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.

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 a couple of weeks ago. As expected the $1240 level remains key as it has provided plenty of resistance over the last few months and is now playing a role as gold has retreated 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 slipped on Wednesday as the dollar paused for breath after sharp gains and caution prevailed in financial markets ahead of a meeting of finance ministers that is set to discuss Greece’s future in the eurozone. Uncertainty over whether a compromise could be found to avoid Greece’s exit from the eurozone could lift retail demand for the metal, often seen as an insurance against risk.

Spot prices are however down nearly 4 percent so far this month as the strong dollar and expectations of an interest rate rise in the United States weighed on investor sentiment. Spot gold was at $1,230.50 an ounce, bouncing back a bit from a three-week low of $1,228.25 hit last week.

U.S. gold for April delivery edged up $2.00 to $1,234.10 an ounce. “There has been some retail demand driven by the situation in Europe from the end of December,” Natixis analyst Bernard Dahdah said. “That said, prices are flat and people are possibly not expecting a breakthrough from this week’s meetings,” he added. “The big story for gold is going to be the interest rates in the U.S. and the hawkishness of some Fed officials.”

Gold February 11 at 22:20 GMT 1218.2 H: 1238.8 L: 1216.6

Gold Technicals:

During the early hours of the Asian trading session on Thursday, Gold is easing lower well below the key $1240 level down below $1220. Current range: trading right below $1220 around $1218.

Further levels in both directions:

• Below: 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 above 60% as it has eased back below $1240. The trader sentiment is in favor of long positions.

Economic Releases

• 00:01 UK RICS House Price Balance (Jan)
• 00:30 AU Unemployment (Jan)
• 10:00 EU Industrial production (Dec)
• 10:30 UK BoE Releases Quarterly Inflation Report
• 13:30 CA House Price Index (Dec)
• 13:30 US Initial Claims (07/02/2015)
• 13:30 US Retail Sales (Jan)
• 15:00 US Business inventories (Dec)
• EU EU leaders hold summit in Brussels

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