Gold markets have broken down rather significantly at the end of the month of September, as we continue to see a lot of negativity. At this point, it looks like gold has further to go, perhaps dropping down to the $1800 level. A lot of this comes down to interest rates spiking in the United States, which is toxic for gold. In other words, you need to think of it through the prism of a large trader: “Why buy gold and risk all of the volatility when you can just simply hold onto bonds and make a return?” Furthermore, you also have to look at this through the prism that there is storage costs involved in gold as well.
Looking at the absolutely brutal candlestick and breakout of the triangle on the weekly chart, it looks like we have plenty of momentum to the downside. At this point, any short-term rally ends up being a selling opportunity, with the $1900 level above being a bit of a ceiling. That is also where the 50-Week EMA says, therefore I think it offers a bit of a barrier for traders to deal with. Gold more likely than not will continue to be a “fade the rally” type of market in the beginning part of the month.
- The $1800 level underneath will be a major support level, and we also have the 61.8% Fibonacci level hanging around that area, followed by the 200-Week EMA as well.
- This is a market that I think will have a very noisy month in October, but by the end of the month, it would not surprise me at all to see some type of value play just waiting to happen.
- After all, sooner or later things are going to get out of hand and people are going to do what they can to find safety, and gold sometimes can provide that.
- However, we need interest rates in the United States to settle down before that truly happens.
If you’re going to trade gold, pay close attention to the 10 year yield in the United States, because the negative correlation remains, and it will probably continue to be a major driver of where we go in the next month or so.
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