Gold markets rallied during the trading session on Monday to break through the 50 day EMA and of course the crucial $1300 level. By doing so, we pierced a major round number, and of course showed signs of life again. Keep in mind that we had formed a couple of hammers during the previous days, so there was a lot of support just waiting to take over the market. By forming double hammers, that will have attracted a lot of attention by traders in general.
Just below, I see the $1280 level as massive support. That is an area that has been crucial several times since December, so it makes a lot of sense that we will continue to find interest below. That doesn’t necessarily mean that we are going to scream to the upside, but it certainly looks likely that we are going to find interest on dips. That being the case, I think that a lot of value traders are in the gold market right now looking to take advantage of it.
The 200 day EMA is at the $1275 level, which is just below that previous support level. Overall, it’s not until we break down below that level that I would be interested in trying to short this market, which would be a very negative sign and probably send the gold market reeling. The US dollar of course has its effect on the gold market, and it did sell off during the trading session, driving gold higher. If it recovers, that will more than likely send gold lower. In the short term though, I think that pullbacks are buying opportunities, just as a break above the top of the candle stick for the day on Monday would be a buying opportunity. Above, I see the $1315 level as resistance, just as I see the $1325 level. All things being equal I suspect we will test those levels.
