Pay close attention to the rate of change in the yield of bonds, because if it is a slow and gradual rise, then I believe that gold should do fairly well.
Gold markets initially tried to rally during the course of the trading session on Thursday but failed to continue going higher at the 200 day EMA as it continues to be quite resistive. At this point, the market then felt to reach down below the 50 day EMA, which of course was a very negative sign. However, by the end of the session we turned around to break above the 50 day EMA and now it looks like the market is essentially doing the same thing it has been doing for several days.
These are two major averages that a lot of people pay attention to, so it should not be overly surprising that we are stuck in this general vicinity. Furthermore, you have to pay close attention to the US dollar, because the gold market is highly influenced by it. Now that that we have broken down below the 50 day EMA, it looks like the market is finding value hunters underneath just above the $1750 level. I think what we are looking at here is a market that is trying to figure out where we are getting ready to go longer term.
When you look at the charts you can see that we have formed a double bottom just below the $1700 level, so I think if we break down below the $1750 level, then we will go testing that area. However, the $1750 level above had been resisted previously, broken out above, and now has been retested. At this point, we have to question whether or not this attempt to form a basing pattern has started to stick? A break above the $1800 level opens up the possibility of a much bigger move, and therefore I think that is the key for buying this market. Until then, I would be hesitant to put a lot of money into the gold market, but it certainly looks as if we are trying to turn things around. It could be very noisy over the next couple of weeks, but I do have my eye on this market as a confirmation of the return could very well send this market looking towards the highs again. Pay close attention to the rate of change in the yield of bonds, because if it is a slow and gradual rise, then I believe that gold should do fairly well.