Gold markets continue to consolidate near the $1150 level, coinciding with the 20-day exponential moving average. Quite frankly, this is the wrong time of year to expect massive moves, as we haven’t even had the first employment announcement yet. After all, the markets will be focusing on what the Federal Reserve may or may not do as far as interest hikes are concerned, so certainly the employment situation in the United States will take center stage.
Even though we have shown signs of life over the last several sessions, there is still a significant barrier in the form of the $1200 level when it comes to gold. Not only is a large, round, psychologically significant number, but it is also the scene of the 38.2% Fibonacci retracement level from the massive spike that occurred after the surprise election of Donald Trump.
Clearly, we are still very negative over the longer term, as the downtrend has not been broken. Yes, there are some minor trendlines that you can make an argument for being broken, but at the end of the day the US dollar remains strong, and that’s always going to work against the value of gold. Also, if the employment numbers look healthy, that strengthens the case for further interest rate hikes, which of course will continue to buy the US dollar going forward.
I am looking for short-term rallies that show signs of exhaustion, perhaps on hourly or maybe 4-hour charts. Every time we rally, I will be waiting to sell. I believe that if we break down below the bottom of the range for the Tuesday session, that’s a very bearish sign and should send this market looking for the $1125 level. Although I recognize that we could continue to rally, I’m not choosing to fight this trend anytime soon, and therefore will remain bearish. Longer-term, I think there’s an argument to be made for gold, but I’m not willing to take up that fight right now.
