Gold markets spiked initially on Tuesday but have given up early gains as both the 50-day and the 200-day EMA indicators seem to be too much for the market. This is a very bad look, as forming a shooting star after an attempt to bounce from support typically means that we could retest that support, and thereby sell off a bit. If that does in fact become the case, we could be looking at a serious retest of the $1780 support region.
Breaking down below that level opens up the possibility of a move down to the $1750 level, where we would have buyers coming back into the market. That is an area that I think will be important as well, because if we give that up, it is likely that gold will fall apart completely. On the other hand, if we get a move to the upside, breaking above the top of that shooting star would be a very positive sign. Not only would you take out the resistance from earlier in the day, but you will also have seen a shooting star get broken to the upside, which is quite often a very strong sign as well.
I believe it does make sense that the markets remain volatile, as there are central banks meeting from around the world. What will be particularly interesting is that we not only have central banks meeting, but we also have the jobs number coming out on Friday. All of this can lead to chaos and volatility in the US dollar, which can lead to chaos and volatility in the gold market. In fact, a negative correlation with the US dollar is quite common, so you need to pay attention to what is going on in the US Dollar Index. It does not have to move in an exact inverse correlation, so you cannot base all of your trading on that, but it does in general keep you on the right side of the market. Because of this, you cannot trade gold in a vacuum. You also need to pay attention to interest rates in America, because if they suddenly take off to the upside, that makes gold a lot less attractive as well.
