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Gold: Continues To Hover Just Below Key Level At $1240

Published 10/20/2014, 12:31 AM
Updated 03/05/2019, 07:15 AM
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Gold for Monday, October 20, 2014

Over the last few days to finish out last week gold ran into the previous key level at $1240 which has resisted and forced gold a little lower, although it did rally and surge through to reach four week high in the process.  During this period, gold has consolidated and traded within a narrow range right around the key $1240 level. 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.   Since that time however gold has rallied higher and returned to back above $1230 again and the resistance level at $1240. Should gold retrace again, the next obvious level of potential support remains at $1200 which is a long term key level. 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 up to near 65% as gold has returned to the resistance level at $1240. 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.

Way back since March, 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 are now distant memories however may play another role 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 $1200.

Gold settled lower on Friday as U.S. equities rebounded but managed to log a second straight weekly gain as concerns over the global economy have raised speculation that the U.S. Federal Reserve could keep interest rates low for longer.  The dollar index rose, and the S&P 500 index gained nearly 2 percent after data showed U.S. housing starts and permits rose in September, a signal the market’s modest recovery is supporting what appears to be growing strength in the broader economy.  U.S. equities, however, are set for their fourth straight weekly decline, their longest streak in more than three years, on concerns about the economy and the spread of the Ebola virus.  “Gold has had a good week because just about everything else has had a bad week,” Macquarie analyst Matthew Turner said. “The rally has paused today, however, as the wider markets are wondering whether things really are quite as bad as they thought they were yesterday.”

Gold Daily ChartGold 4 Hour Chart

Gold October 19 at 23:10 GMT   1237.9   H: 1240.4   L: 1237.5

Gold Technical

S3 S2 S1 R1 R2 R3
1200 1240 1290

During the early hours of the Asian trading session on Monday, Gold is remaining quite steady around the key $1240 level after recently making its way through that level. Current range: trading right around $1239.

Further levels in both directions:

• Below: 1200.

• Above: 1240 and 1290.

OANDA’s Open Position Ratios

XAU/USD Open 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 up to near 65% as gold has returned to the resistance level at $1240. The trader sentiment is strongly in favour of long positions.

Economic Releases

  • 21:45 (Sun) NZ External Migration (sa) (Sep)
  • 05:00 JP Leading indicator (Final) (Aug)
  • 08:00 EU Current Account (sa) (Aug)
  • 10:00 UK CBI Industrial Trends (20th-25th) (Oct)
  • 12:30 CA Wholesale Sales (Aug)
  • EU EU Foreign Ministers Hold Meeting in Luxembourg

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