- Gold markets initially shot higher during the trading session, but then pulled back as we got close to the $1800 level. All things being equal, this is a market that has been quite noisy, and overextended.
- Being as overextended as it is, it makes a lot of sense that we would see a little bit of a pullback.
- The $1800 level has a certain amount of psychological importance built into it, especially as the area had pulled back from previously. If we break above the $1800 level, then it’s possible that we could go much higher.
Ultimately, if we break down below the bottom of the candlestick for the trading session, it’s likely that we could go down to the 200-Day EMA. The 200-Day EMA underneath could offer a little bit of support, but if we were to break down below there, then it’s possible that we could go down to the $1725 level. Keep in mind the gold is negatively correlated to the US dollar and interest rates, so that will continue to be something that you have to pay attention to. Furthermore, the market is going to continue to see a lot of volatility since people are still trying to figure out what the Federal Reserve is going to do.
Looking to Short this Market
Ultimately, this is a market that I think will continue to see a lot of questions asked of it, because quite frankly a lot of people out there are trying to figure out what the Federal Reserve means when they say they are going to stay “tight” with monetary policy. Ironically, as simple, and straightforward as that is, there are a lot of morons out there arguing about what it means.
At this point, gold has gotten so far ahead of itself that I am more than interested in shorting this market, but if we do break the $1800 level it’s likely that we could see a bigger move. At that point, you’d have to think that the market is going to continue to see plenty of upward momentum, perhaps sending gold to the $2000 level. That would obviously take a major selloff in the greenback, which I think the market does not have built into it, but at this point it seems to be ripe for some type of pullback.
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