The gold markets have initially fallen during the trading session on Thursday as the $1900 level has been crucial. However, we have seen buyers since then to turn things around and with that being the case it is likely to see more confusion and hectic choppiness. This does make a certain amount of sense due to the fact the monetary policy in the United States is still a bit of an open question although loose would be the most applicable term. We have recently heard Federal Reserve members talking about the possibility of bringing up monetary policy somewhat soon, so that could have a part of play here.
From a technical analysis standpoint, the $1900 level is crucial as it previously was resistance and support. That being said, the market looks as if it is trying to decide whether or not we could get above there, and a break above the top of the shooting star from the Wednesday session would open up the possibility of a move towards the $1950 level. After all, gold markets do tend to move in $50 increments, so that is something worth paying attention to. Because of this, you need to be very cautious about putting too much money into the market right away, as there could be a lot of choppy behavior.
If we do break down from here, the $1850 level is an area that we should pay close attention to, as it was the scene of a breakout and a retest of support. The downtrend line has sliced through that area, which should be supportive as well. Furthermore, the 50 day EMA has broken above the 200 day EMA to form a “golden cross.”
The fact that we ended up forming a bit of a hammer that was preceded by a shooting star suggests to me that we are probably trying to carve a short-term consolidation area, one that could launch the next move. Because of this, I look at these two candlesticks as a potential launching pad, trading in the direction of which we break. Friday of course is very possibly going to be a somewhat quiet session, so do not be surprised at all people were not willing to be committal when it comes to the position. That being said, we have certainly seen a lot of bullish pressure as of late.
