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Gold continues to struggle

I was looking at shorting gold on moves to $1250 last week; however spot gold didn’t quite push up to my proposed limit, with $1248.9 being the high mid-point.

Technically gold has made a series of lower highs on the daily chart, and traders will be keen to see if the metal can make a lower low in the coming weeks, with a move through $1180 (the 28 June low) in their sights. On the 30-minute chart there is good supply seen between $1250 to $1240; thus I feel a move to this level could present itself with better levels to initiate short positions.

There was some initial selling in gold in Asia trade, following weekend news that there has been an easing of tensions in the Middle East. A deal has been announced with Iran regarding the setting of limits on its nuclear program, and as a consequence there will be some easing of sanctions, including oil exports; hence the falls in Brent and US light crude oil today.

We have also seen increased geopolitical tensions between China and Japan over the Senkaku Islands during the last 24 hours, which is a space traders will continue to watch, although the hope is that recent comments have been merely rhetoric and nothing more will escalate.

Looking forward there doesn’t seem to be a huge amount to drive price action, with pending US October home sales expected to increase 1.1% on the month (released at 3pm London time), while the regional Dallas Federal Reserve manufacturing report (released at 3:30pm) is expect to improve modestly to five, up from 3.6. A strong reading on either metric will probably cause a modest selling of gold. With the market much more concerned with jobs, however, the 6 December US payrolls report is going to be key to the market.

There are also no major speeches due from any Fed members this week so I expect volatility to fall, with more technical positioning on the cards.

Spot gold chart

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