Gold for Thursday, May 8, 2014
Over the last couple of days gold has just eased back a little from around $1315 however during the last 24 hours or so, it has fallen sharply back down below $1300 down to support around $1290. Prior to the fall it had done well to surge higher to around $1315 towards the end of last week which saw it move well off support around $1280. If gold was to retreat again back towards $1275 then a large descending triangle would be forming which would indicate lower prices below $1275. Over the last couple of 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 prices have fallen after Federal Reserve Chair Janet Yellen presented an upbeat assessment of the US economy in her testimony to Congress. Gold for June delivery, the most active contract, on Wednesday fell $US19.70, or 1.5 per cent, to settle at $US1,288.90 a troy ounce on the Comex division of the New York Mercantile Exchange. Gold prices have been under pressure in recent weeks, as signs of an economic rebound in the US galvanizes expectations that the Federal Reserve will continue reducing its monthly bond purchases, paving the way for interest-rate increases next year. Gold is a zero-yielding asset that struggles to compete with interest-bearing investments such as Treasury bonds when interest rates climb.
On Wednesday, gold dropped below $US1,300 an ounce after Yellen, in prepared testimony to Congress’s Joint Economic Committee, pinned recent economic weakness on the harsh winter. The Fed chief also said that indicators point to a rebound in spending and production, “putting the overall economy on track for solid growth in the current quarter”. “Anything with a hawkish tone to it is going to be hard on the gold market,” said Sterling Smith, a futures specialist with Citigroup, adding that the precious-metal market has been highly dependent on the central bank’s easy money policies to drive investment demand.
(Daily chart / 4 hourly chart below)
Gold May 8 at 01:30 GMT 1291.8 H: 1292.1 L: 1289
Gold Technical
S3
S2
S1
R1
R2
R3
1290
1275
—
1315
1330
—
During the early hours of the Asian trading session on Thursday, Gold is trying to rally higher and move back towards the $1300 level after falling strongly in the last 12 hours or so. Current range: trading just above 1290 around 1292.
Further levels in both directions:
• Below: 1290 and 1275.
• Above: 1315 and 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 moved back up towards 70% as gold falls lower under the $1300 level. The trader sentiment remains in favour of long positions.
Economic Releases
01:30 AU Unemployment (Apr)
11:00 UK BoE MPC – APF Total (May)
11:00 UK BoE MPC – Base Rate (May)
11:45 EU ECB Rate Announcement (May)
12:15 CA Housing starts (Apr)
12:30 CA House Price Index (Mar)
12:30 EU ECB President Draghi gives press conference following interest rate announcement
12:30 US Initial Claims (03/05/2014)
*All release times are GMT
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