While the gold market has looked good recently, the reality is that we are starting to show cracks in the ice, so I do believe that Wednesday is a crucial session.
The gold markets fell again during the trading session on Tuesday to reach towards the $1850 level. This is an area that has been important more than once, as we have seen resistance previously, and then support later. Ultimately, the 50-day EMA is sitting just below there, as it is also an area that has been important more than once. The gold market looks very heavily supported in this area, not only due to the 50-day EMA, but also the downtrend line and the 200-day EMA, which is at the $1812 level.
That being said, we have the Federal Reserve statement coming out later on Wednesday that will certainly have a major effect on the US dollar and, by extension, gold. The Federal Reserve is likely to continue flooding the market with liquidity, so if that is going to be the case, it should be negative for the greenback. In that scenario, I would anticipate that gold could go higher, perhaps reaching towards the top of the small range in the short term, but if we were to break above the highs of the last couple weeks, the market is likely to go looking towards the $1950 level. That is an area where we have seen selling pressure previously, so if we break above there then I think it would be a strong sign.
Breaking above that level could open up the possibility of a move towards the $2100 level, an area that had previously been the highs. I think what we are looking at here is the possibility of the market starting a bigger move if the Federal Reserve does in fact even suggest that things could get more aggressive to the low side.
If we do break down below the 200-day EMA, then it is likely that the market could go looking towards the $1700 level. That is essentially where we ended up forming a bit of a double bottom previously, so I think it makes sense that we would see buyers and support in that area. Breaking down below there could send gold crashing. While the gold market has looked good recently, the reality is that we are starting to show cracks in the ice, so I do believe that Wednesday is a crucial session.