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Gold: Drifts Lower Below $1230

Published 10/28/2014, 01:21 AM
Updated 03/05/2019, 07:15 AM

Gold for Tuesday, October 28, 2014

Over the last couple of weeks Gold has ran into the previous key level at $1240, however it also managed to surge higher to a five week high at $1255 early last week. In the last few days to finish last week however it fell strongly back down below the $1240 level and to near $1226 before rallying a little higher. For the last several weeks Gold has enjoyed solid support at $1215 after falling strongly a couple of few ago from $1240 to just below $1215, however a few weeks ago it dropped to its lowest level in 2014 near $1180. It will be interesting to see whether the support level at $1215 can be called upon again and provide some much needed support to gold to stop it falling back down below $1200 again.

The next obvious level of potential support remains at $1200 which is a long term key level, should gold retrace again. Several weeks ago Gold was enjoying 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. 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. The OANDA long position ratio for Gold has moved back to above 65% as gold has fallen back down through the $1240 level.

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 back in May 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 strong rally higher. 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.

Gold settled lower on Monday ahead of this week’s Federal Reserve meeting, with a retreat in the dollar and a softer tone to stock markets after downbeat German economic data helping the metal.  The precious metal fell 0.5 percent last week as global equities posted their biggest weekly percentage gain since July 2013, while the U.S. dollar also strengthened.  U.S. gold futures for December delivery settled down $2.50 an ounce at $1,229.30.  Spot gold was last flat at $1,225 an ounce.  Gold’s outlook this week will depend largely on a Fed policy meeting, when the U.S. central bank is widely expected to end its bond-buying stimulus program, known as quantitative easing, analysts said.  The Fed’s two-day meeting, which begins on Tuesday, will also be watched for clues on whether any slowdown in Europe or elsewhere could affect the central bank’s monetary policy.  “The Fed is likely to end QE3, so the accompanying statement and Q&A will be as usual closely monitored,” Societe Generale analyst Robin Bhar said. “Will the Fed bear any appreciation of what’s going on in the euro zone and China in terms of a slowdown?”

Gold Daily ChartGold 4 Hourly Chart

Gold October 28 at 01:45 GMT   1229.4   H: 1229.6   L: 1222.7

Gold Technical

S3 S2 S1 R1 R2 R3
1200 1255 1290

During the early hours of the Asian trading session on Tuesday, Gold is trying to rally back above the $1230 level after starting the week lower. Current range: trading right around $1229.

Further levels in both directions:

• Below: 1200.

• Above: 1255 and 1290.

OANDA’s Open Position Ratios

XAU/USD 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 eased back towards 60% as some clients are closing their longs and assessing shorts down to $1200. The trader sentiment is strongly in favour of long positions.

Economic Releases

  • 22:50 (Mon) JP Industrial Production (Prelim.) (Sep)
  • 12:30 US Durable goods orders (Sep)
  • 12:30 US Durables ex transport (Sep)
  • 13:00 US S&P Case-Shiller Home Price (Aug)
  • 14:00 US Consumer Confidence (Oct)
  • US Federal Reserve FOMC meeting (to 29th)

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