The gold market tried to rally significantly during the trading session on Thursday after the ISM Non-Manufacturing figures came out softer than anticipated. This drove money into safety assets, but ultimately at this point in time it looks as if Gold is starting to give back some of those gains. This makes quite a bit of sense though, as we head into the jobs figure for the Friday session. Obviously it will have a major influence on the US dollar, which in and of itself will have a major influence on the gold market overall.
Now keep in mind that this pair has been in an uptrend for some time, and we had recently tested a major uptrend line. We also have the 50 day EMA just below the candle stick, and also the psychologically important $1500 level. All things being equal, this is a market that should offer plenty of opportunities on pullbacks, but you will have to be patient enough to see some type of supportive candle stick formed. Beyond that, the Non-Farm Payroll figure coming out during the Friday session will for the US dollar around quite drastically at 8:30 AM, New York time.
I think that a pullback in gold would be a buying opportunity, but you may need to drill down to shorter time frames to find that opportunity. The alternate scenario of course is that we break above the top of the candle stick during the trading session, which of course is a very bullish sign. At that point, the market probably goes looking towards the $1540 level, perhaps even the $1560 level after that. That would retest the highs, and gold breaking above there obviously brings in more of a “buy-and-hold” scenario.
All that being equal, there is also not only the trend line underneath but there’s also the $1450 level. That is where I draw the line as far as the trend overall. If we were to break down below that level at the very least we would probably test the 200 day EMA, which could attract a lot of attention but if we get that breakdown it’s going to be very difficult to gain confidence in gold going forward. Overall though, there are enough concerns out there that it’s hard to imagine that gold will break down significantly anytime soon. As with all markets, it’s going to be easy or disciplined going with the overall uptrend.