Pay attention to the US dollar, because it almost certainly will move inversely of this market.
The gold market initially fell during the trading session on Tuesday but found plenty of buyers to turn things around in order to form a bit of a hammer. The hammer is sitting just below the downtrend line that has been important for some time, and of course we are sitting just below the $1850 level that causes a significant amount of pressure. If we can break above the $1850 level, then it is likely that the gold markets will go much higher. A break above that level frees a lot of momentum back into the marketplace.
If we can break above that $1850 level, it is likely that we are going to go looking towards the $1950 level. Because of this, I think that it is only a matter of time before we would see some type of break out if the US dollar continues to get hammered, which of course it is being crushed. We did initially see the US dollar strengthened a little bit during the trading session, but that was reversed very quickly.
If we were to break down below the bottom of the candlestick for the trading session on Tuesday, then we are likely to go looking towards the 200 day EMA which sits just below the $1800 level. Underneath there, then we have the 50 day EMA which is trying to turn to the upside and cause a so-called “golden cross.” I am not a big trader of that signal, but it will course attract a certain amount of attention. If we managed to break down below both of those moving averages, then I think it opens up a pretty big move down to the bottom of the recent trend where we formed that double bottom. Just below the $1700 level.
I do think that it is going to be very volatile regardless, but it certainly looks as if we are going to see some type of bigger move sooner or later. Pay attention to the US dollar, because it almost certainly will move inversely of this market. The bond yields in the United States also need to be paid close attention to, so noting whether or not yields go higher or lower. If they drop again, that could be good for gold, but at the end of the day only time will tell. I am waiting for some type of impulsive candlestick to follow.