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Gold Is Threatening To Stay Below $1300

Published 07/31/2014, 01:48 AM
Updated 03/05/2019, 07:15 AM

Gold for Thursday, July 31, 2014

In the last few days gold has been easing lower and placing pressure on the support level at $1300 which may be about to give way.  Over the last few weeks the $1290 level has shown some signs of support and held gold up. Gold did well at the end of last week to surge higher through the $1300 level back up towards $1310 before easing slightly to start this new week. The $1300 level has been reinforced as a level of significance in the last couple of weeks with gold falling sharply from its highs above $1345 back down to this level where it has been met with overwhelming demand, although this support seems to be wavering.  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 surged back up towards 70% showing a change in sentiment to more bullish.

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.

Gold held overnight losses to trade below $1,300 an ounce on Thursday and looked likely to extend declines to a fourth day as optimism over U.S. economic growth curbed safe-haven appetite for the metal.  Spot gold was flat at $1,295.20 an ounce by 0021 GMT, after dropping 0.3 percent in the previous session.  The Federal Reserve on Wednesday reaffirmed it was in no rush to raise interest rates, even as it upgraded its assessment of the U.S. economy and expressed some comfort that inflation was moving up toward its target.  After a two-day meeting, Fed policymakers took note of both faster economic growth and a decline in the unemployment rate, but expressed concern about remaining slack in the labor market.  Data on Wednesday also showed that the U.S. economy rebounded sharply in the second quarter as consumers stepped up spending and businesses restocked. Gross domestic product expanded at a 4 percent annual rate after shrinking at a revised 2.1 percent pace in the first quarter.

Gold Daily Chart
Gold 4 Hourly Chart

Gold July 31 at 03:40 GMT   1294.4   H: 1297.3   L: 1294.1

Gold Technical

S3 S2 S1 R1 R2 R3
1290 1275 1240 1330 --- ---

During the early hours of the Asian trading session on Thursday, Gold is trading in a very small range between $1294 and $1297 after dropping a little in the last 12 hours or so.   Current range: trading right below $1300 around $1295.

Further levels in both directions:

• Below: 1290, 1275 and 1240.

• Above: 1330.

OANDA's Open Position Ratios

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 held well above 60% as gold has eased back under $1300 again.  The trader sentiment is strongly in favour of long positions.

Economic Releases

  • 01:30 AU Building approvals (Jun)
  • 01:30 AU Export & Import price index (Q2)
  • 05:00 JP Housing starts (Jun)
  • 06:00 JP Construction orders (Jun)
  • 09:00 EU Flash HICP (Jul)
  • 09:00 EU Unemployment (Jun)
  • 12:30 CA GDP (May)
  • 12:30 US Employment cost index (Q2)
  • 12:30 US Initial Claims (26/07/2014)
  • 13:45 US Chicago PMI (Jul)

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