I think it is going to be choppy, but it would not surprise me at all to see this market rally.
Gold markets were all over the place during the trading session on Tuesday as traders came back from the Memorial Day holiday. With the pits open, quite a bit more volume was found, and it is likely that the market has shown a little bit more of its true nature during the trading session. At this point, the market is looking a bit confused, and therefore a bit stagnant.
The $1900 level seems to be a bit of a baguette for price, and that is especially true after the candlestick that has just formed. With that being the case, I think it is a scenario where we will have a lot of noise in the short term, as traders have no idea what to make of the severity of inflation. Yes, inflation seems to be a bit strong at the moment, but there are questions as to whether or not it is structural or if it is something to do with bottlenecks and the supply chain. Because of this, this is a market that is going to give headaches to a lot of traders. That being said, when I look at it from a purely technical analysis standpoint, there are a couple things that I am paying close attention to.
If we pull back from here, it is likely that the $1850 level will offer support, just as long as the idea of gold going higher makes sense. Furthermore, the market is also going to pay close attention to the US dollar, and if it continues to fall, that also would have a major influence on what happens with gold next. In this scenario, I think that it is very likely we will continue to see gold go higher, but we could see a little bit of a pullback in the short term. The downtrend line also offers support, so looking at this chart it is easy to see that there would be a lot of support underneath, so I think it is easier to find value and go long than it is to try to short this market. In fact, it is not until we break down below the 200-day EMA that I would consider doing so. I think it is going to be choppy, but it would not surprise me at all to see this market rally.