Gold Continues To Look South, Towards Key $1300 Level

Gold for Thursday, July 24, 2014

Gold is slowly but surely easing lower just below $1305 back towards $1300 which it has now been doing for the last few days and it is looking to threaten any potential support at this level.  The $1300 level has been reinforced as a level of significance in the last week with gold falling sharply from its highs above $1345 back down to this level where it has been met with overwhelming demand. This has seen gold rally higher and now consolidate just above the $1310 level. During the second half of June, gold steadily moved higher but showed numerous incidents of indecision with its multiple doji candlestick patterns on the daily chart. This happened around $1320 and $1330. Several weeks ago now gold enjoyed a stunning surge higher to break through some key levels along its way to reaching a then two month high just above $1320 and immediately after it eased away ever so slightly and consolidated with its flow of doji patterns. It was then able to slowly move higher to a four month high above $1345. It was also able to break through the $1300 level which has recently played a role again. If sellers do take advantage of these relatively higher prices which will most likely bring the $1300 level back into play. The OANDA long position ratio has dropped to its lowest level in a few months around 51% showing a much more bearish sentiment than the long term average.

At the beginning of June, gold did very well to repair some damage and return to the key $1275 level, then it has continued the momentum pushing a higher to its recent four month high. After moving so little for an extended period, gold dropped sharply several weeks ago from above the well established support level at $1275 as it completely shattered this level falling to a four month low around $1240. It remained around support at $1240 for several days before its recent rally higher. Prior to the strong fall a few weeks ago gold had remain fixated on the $1293 level and had done very little as volatility has dried up completely resulting in gold moving very little. It pushed down towards $1280 before sling shotting back and also had an excursion above $1300 for a short period before moving quickly back to the $1293 area again. Over the last few weeks gold has eased back from around $1315 to establish its recent narrow trading range below $1295 before its recent slump.

Over the last few months the $1275 level has established itself as a level of support and on several occasions has propped up the price of gold after reasonable falls. Throughout the second half of March gold fell heavily from resistance around $1400 back down to a several week low near support at $1275. Both these levels remain relevant as $1275 continues to offer support and the $1400 level is likely to play a role again should gold move up higher. Through the first couple of months of this year, gold moved very well from a longer term support level around $1200 up towards a six month higher near $1400 before returning to its present trading levels closer to $1300.

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Gold ended the trading session lower on Wednesday, pressured by firmer stock markets after positive U.S. data and corporate earnings, but the metal was underpinned by simmering conflict in Ukraine and the Middle East.  Sluggish physical demand in Asia in the seasonally quiet summer period is also weakening support for any price rally.  Other than seasonality, the possibility of a further drop in prices due to an improving U.S. economic outlook and stronger dollar is also keeping buyers away, dealers said.  U.S. gold futures ended $1.60 lower at $1,304.70 an ounce and spot gold was last down 0.2 percent at $1,304 an ounce, after losing 0.4 percent in the previous session, pressured by firmer equities. The dollar rose 0.4 percent against a basket of major currencies.

Gold July 24 at 02:30 GMT   1299.4   H: 1305.3   L: 1298.5

Gold Technical

During the early hours of the Asian trading session on Thursday, Gold is slowly but surely easing lower just below $1305 back towards $1300 which it has now been doing for the last few days.  Current range: trading just above $1300 around $1303.

Further levels in both directions:

• Below: 1300 and 1240.

• Above: 1330.

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 surged up to above 60% again as it has eased back from its highs around $1330 back closer to $1300 again.  The trader sentiment is strongly in favour of long positions.

Economic Releases

• 21:00 (Wed) NZ RBNZ - Cash Rate (Jul)
• 22:45 (Wed) NZ Trade Balance (Jun)
• 23:50 (Wed) JP Customs Cleared Trade (Jun)
• 08:00 EU Flash Composite PMI (Jul)
• 08:00 EU Flash Manufacturing PMI (Jul)
• 08:00 EU Flash Services PMI (Jul)
• 08:30 UK Retail Sales (Jun)
• 12:30 US Initial Claims (19/07/2014)
• 13:45 US Flash Manufacturing PMI (Jul)
• 14:00 US New Home Sales (Jun)

Original post

Written By: MarketPulse