Gold Forecast: Runs Out of Steam During Wednesday Session

• Gold markets have slowed down a bit during the Wednesday session as we finally have gotten a bit overstretched.
• At this point, it does make a certain amount of sense that we take a breather, especially considering that Thursday features the Consumer Price Index announcement coming out, which of course will have a major influence on inflation expectations and of course Federal Reserve policy.

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The market has a ton of support underneath, and quite frankly I would love to see some type of pullback in order to offer a little bit of value. In that scenario, I’ll be looking for a nice drop, followed by a nice bounce. That bounce should allow us to pick up a bit of value, which I think is going to be the way forward in this market. Keep in mind that although tight monetary policy can work against gold, the reality is that the general trading public as of late has been using gold as a way to preserve wealth, and that attitude could very well continue going forward.

Waiting for the CPI Numbers

If we do break above the top of the candlestick, and more likely than not will open up the possibility of a move to $1900, but I think it’s a little overdone at this point. Ultimately, I think you have a situation where you are just looking for value. I’m hoping that the CPI number causes some type of massive reaction that offers that. It’s not until we break down below the uptrend line that I would consider shorting, and at this point that would mean a move down below the $1830 level or so. It’s also worth noting that the 50-Day EMA has now broken above the 200-Day EMA, forming the so-called “golden cross” that a lot of longer-term traders look for.

Quite frankly, you should be looking at pullbacks at this point in time as healthy for this market, because you don’t want it going in one direction forever. After all, you need to find enough value for new buyers to come in and pick this market up. I do think you get it, but a lot of patients will be needed at this point. If we do take off to the outside, I’m not willing to jump in and chase this move, even though I think it probably goes to the $1900 level quickly.

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