Gold Forecast: Continues to Test a Rising Wedge

Gold markets have fallen rather hard during the Thursday trading session, breaking below the $1800 level in the spot market. Ultimately, this is a market that has seen a lot of noisy behavior, but we have been hanging about in a rising wedge for a while. The rising wedge does suggest that perhaps we could get a little bit of a breakdown, but I don’t necessarily think that it is suddenly going to be the end of a bullish run that we have seen for some time. I think at this point, we are more likely than not to see some type of pullback as we have gotten a little bit ahead of ourselves.

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Keep in mind that the 200-Day EMA underneath could offer a bit of support, I think it’s probably likely that we will continue to see that act as an area that people might be interested in. If we were to break it down below there, then the 50-Day EMA is almost immediately below it. Speaking of which, we may get the so-called “golden cross” that longer-term traders like to trade-off. Regardless, I think there’s a lot of support underneath that comes into the picture and therefore it’s likely that a pullback is somewhat temporary.

The market is Going to Suffer

• For what it is worth when you look at the rising wedge itself, it could open and move down to that area, or perhaps even just a little bit below there.
• On the other hand, if we turn around a break above the $1825 level, then it’s possible that we could go looking to the $1875 level.
• At this juncture, I think this is a market that’s probably going to suffer at the hands of an illiquid environment as we head into the holidays, but longer-term it certainly looks as if there are buyers willing to jump in and take advantage of the situation when we pull back.

On the other hand, please suddenly get a massive surge in the US dollar, which could put a bit of pressure on gold, but it’s hard to tell whether that will be long-term. We have seen in the past where both can go higher, especially in recessionary times as people are trying to protect wealth in times of uncertainty. All things being equal, I think the market still has plenty of buyers, but we may need to do a little bit of destruction to offer enough value.

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