Gold markets rallied a bit during the early part of the trading session on Monday, only to give up gains and go looking towards the uptrend line. The uptrend line that I have marked on the chart is somewhat important, but I think the biggest take away from this chart is that we are trying to grind sideways after a massive selloff. We had formed a massive, inverted hammer on Friday, so if we were to turn around and break above the top of that candlestick, that would be a very bullish sign. In other words, we would need to take out the $1820 level.
On the other hand, if we break down below the bottom of the last couple of candlesticks, then it opens up a fresh leg lower, which could have gold looking towards the $1775 level, possibly even down to the $1750 level. Keep in mind that gold has a lot of issues right now when it comes to dealing with interest rates coming out of America, and if they continue to rise that will be like a death knell for gold. After all, it is much more profitable to collect interest payments on a bond then it is to pay for storage for gold. For the retail trader, this is not a major issue, but obviously it has a major influence on pricing over the longer term.
When I look at this chart, I think that we are about to make a rather significant move, and the next move either higher or lower could open up quite a bit of momentum. To the upside, if we were to break above that $1820 level, then I anticipate that the next target will be $1875. If we break down, then I think it is more or less a matter of hitting those previous targets that I talked about, but it is very likely that we would break down even further. This is especially true if we see a sudden spike in the US dollar, US yields, or just generally a dump of precious metals in general. It is worth noting that silver has had a miserable session as well, so it looks like the precious metal markets are falling apart in general, so I am not very excited about gold right now, but I need to have the market make its move before I follow.
