Gold markets rallied a bit during the trading session on Tuesday, breaking above the top of the highs from Monday. This is a very bullish sign, and it’s very likely that we are going to see more choppiness overall, but I still believe in the bullish side of the equation. The $1300 level being broken is a good sign, but there are some issues to worry about above so it’s not a “slam dunk trade.”
Looking at the Thursday and Friday candlesticks, we had formed a couple of hammers which of course is a very bullish sign, and the fact that we broke above $1300 level after that rather viciously suggests that there is plenty of interest in the gold market below. Beyond that, it’s very likely that this market will probably continue to try to find reasons to go higher as the US dollar is overbought, so keep an eye on the greenback in the Forex world, because it will move countercyclical to this market.
To the downside, I believe that the $1280 level is massive support, extending down to the $1275 level where the 200 day EMA is. If we broke down below there then you can start to play with a few trendlines to make a head and shoulders pattern, but that’s a conversation for another day. So far, it looks as if we are going to continue to try to stay afloat in this market.
For myself, I believe that simply comes down to whether or not the US dollar is going to continue to strengthen or not. I think it’s a bit overdone so it makes sense that Gold might get a bit of a lift here. Beyond that, there are a lot of concerns out there that might have people looking for the safety of owning precious metals.
