The US dollar tends to move counter to the gold market, and therefore it is likely that we will see gold rally if we see more of a decline in the value of the greenback.
Gold markets rallied rather significantly during the course of the trading session on Thursday to break above the 200 day EMA. The 200 day EMA has been a massive barrier for buyers to get above over the last couple of weeks, so the fact that we close not only above the 200 day EMA but also closed roughly $20 above it suggests that we are taking off to the upside finally.
All things been equal, the market looks as if it could go to the $1850 level, and then possibly even the $1950 level. That being said, the market is going to pay close attention to the US dollar, and Friday of course is the Non-Farm Payroll announcement, and that will obviously move the US dollar. The US dollar tends to move counter to the gold market, and therefore it is likely that we will see gold rally if we see more of a decline in the value of the greenback.
One thing I think you can count on is a significant amount of volatility during the trading session on Friday, as the US dollar will jump around, causing an inverse reaction here. It does look very bullish of the moment though, so I think that if we get a pullback is more likely than not that we would see buyers on some type of value proposition, especially near the $1800 level. On the other hand, we could break above the top of the candlestick then we will start to make that move much higher.
If we were to turn around and break down below the $1750 level, something that looks much less likely at this point, then it would be an extraordinarily bad sign and could send this market lower, but I think we have finally seen enough momentum to confirm the reversal of the trend, and therefore it is likely that we would see a lot of longer-term buyers getting involved. The size of the candlestick is very important to pay attention to as well, as it is much bigger than many of the other recent candlesticks that we have seen. In general, I think it is likely that eventually the value hunters and perhaps even the short sellers will have to go to the upside. The market has been in a little bit of a channel, so I think it is likely to continue that overall action.