The gold markets have rallied significantly during the course of the trading session on Thursday as we continue to see gold markets race higher due to the idea of fighting inflation. With the market breaking above the $1835 level on Wednesday, we had cleared out a lot of stop losses and now looks like we are simply going to continue drifting higher. That being said, gold is a very volatile market and therefore we need to see some type of pullback in order to find a bit of value that we can get involved in, as chasing the trade is a very dangerous thing to do.
The market has recently seen a very parabolic move, so waiting for value will be paramount. I am looking for some type of move back towards the $1835 level in order to pick up a little bit, and then add to my position as it works out. If I do not get that, then I will be waiting through a certain amount of consolidation in order to work off a lot of the froth. Markets go parabolic and then either pullback or grind sideways, so at this point in time it does make a certain amount of sense that we would see one of the two things happen. Chasing the trade up at this high level is going to be very reckless and difficult, and therefore I think you need to simply wait for an opportunity.
The market breaking back below the $1835 level would be a very negative turn of events, and therefore at that point I would be a short seller if we get a daily close below that level. If that happens, would not be surprised to see this market start to rep towards the $1800 level in that scenario, but it is not very likely to happen in the short term. Keep an eye on the US dollar, because although it has gone higher right along with gold, eventually that may start to diverge again. The shot higher that we have seen will sooner or later run out of momentum, so it is very likely that we could have a “rip your face off” type of moment. That being said, if we can fall apart and then stabilize over the course of a couple of days, I would be much more enthusiastic.
