The gold markets rallied a bit during the trading session on Wednesday but continue to see a significant amount of resistance above the 50-day EMA as there is a bit of selling near the $1850 level. The fact that the market is struggling in this area is perfectly acceptable from a technical analysis standpoint, due to the moving average and the “mid-century mark”, but we also need to pay attention to the fact that rates are rising in the United States, which makes gold quite a bit less attractive due to the fact that you can get a yield by simply holding paper.
On the other hand, if we do see the US dollar get hammered enough, that could send gold higher just because it is priced in that currency, at least in the most liquid forms of the market. A break above the top of the shooting star from the Wednesday session opens up the possibility of a move towards the $1880 level, and then the $1900 level. The $1900 level then opens up the possibility of a move towards the $1960 level.
A pullback from here offers the likelihood of a move back towards the 200-day EMA, and perhaps even the $1800 level. I can see some type of move like that as being likely, due to the fact that people continue to sell treasuries, so you should have both of those markets in the back of your head if you are going to play gold. At the very least, you need to be paid attention to the 10-year note, if not other markets as well.
To the downside, if we were to break down below the $1750 level, then it kicks off a longer-term selling opportunity, as I suspect that gold would probably drop another $250 at the very least. In general, I believe that we will probably go back and forth in this overall vicinity in the short term, possibly trying to build up a base to get this market going higher. We will have to see how the US dollar behaves, because it has been rather stubborn as the entire world has short the greenback, but yet it is not exactly falling apart.
