Gold markets rallied again during the session on Thursday, and even broke above the $1150 level. While this looks extraordinarily bullish, the question then remains whether or not the markets can stay this bullish for any real length of time. After all, we are just now starting to reach towards a significant area of previous support, which should now be significant resistance. Most of this is probably due to interest-rate expectations perhaps moving along a wider timeline, but at the end of the day it’s very likely that this relief rally is exactly what’s needed for sellers to get involved again. Is because of this that I have simply stepped to the sidelines and waiting to see what happens in this general vicinity.
Overbought?
The question now of course is whether or not we are overbought. Perhaps we’d overdid it a little bit? I think that the $1160 level above is massively resistive, and if we can break above there and then you have to start thinking that the move may be “for real.” On the other hand, you also have to keep in mind that the liquidity is a bit low this time year and therefore it doesn’t take as much to spook the market. A resistive candle in this area would be an excellent selling opportunity as far as I can see, but at the very least I would need to see some type of pullback to feel comfortable going long without the aforementioned break out. After all, we have simply gone too far too fast to be comfortable with this type of motion.
Remember, this market is highly sensitive to the US dollars to pay attention to what’s going on in the US Dollar Index. We’re currently testing support over there, so if we find that support, they could very well turn this market back around completely. The US dollar is most certainly on the back foot during the session, but the longer-term trend says otherwise. With this, you will need to be careful if you are going to be a buyer anytime soon.
