The longer-term outlook for gold is going to continue to be very bullish, but that does not mean that we will have an easy road ahead.
Gold markets fell a bit during the trading session on Monday to kick off the week, reaching down towards the $1818 level, which is where the 200-day EMA currently sits. By doing so, we found a certain amount of technical support, as shown by the daily candlestick. The candlestick forms a hammer, which is a bullish sign. At this point, if we can break above the top of the candlestick, it would technically be a buying opportunity.
To the downside, if we were to break down below the bottom of the candlestick from the Monday session, that would be a breach of major support, suggesting that perhaps we could go down to the $1800 level rather quickly, maybe even lower. Nonetheless, a lot of this will come down to real interest rates in the United States rising or falling. If they continue to rise, then it is likely that we will continue to see gold markets suffer. However, if we see interest rates start to drop a bit, then the gold market could turn around and continue the overall basing pattern that we had been forming.
Looking at the overall attitude of the market, the question is not so much as whether or not we can continue to go higher on a breakout above the top of the candlestick, just whether or not the various resistance levels above will be broken easily. The first problem is going to be the 50-day EMA at the $1870 level, and then you have the $1900 level to worry about. There was the previous downtrend line right in that area as well, but we probably are going to lose some of the efficacy of that downtrend line the next time we get there. I think it is going to be very noisy in general. The longer-term outlook for gold is going to continue to be very bullish, but that does not mean that we will have an easy road ahead. This is one of those things where you are probably better off simply buying little bits and pieces along the way, offering a nice investment opportunity, not necessarily a trading opportunity, as it is going to be far too noisy.