Get ready to see continued selling on rallies.
Gold markets initially tried to rally during the course of the trading session on Thursday to reach towards the 50 day EMA. It is not a huge surprise that we have seen a lot of resistance above the 200 day EMA, therefore confirming a bit of a downtrend. Ultimately, the 50 day EMA is sitting just above there, and it looks as if it is trying to slope lower. If it does, then we could form a “death cross” which of course is a very negative technical indication.
If we break down below the bottom of the candlestick, it is very likely that we could go looking towards the $1750 level underneath where there is a significant amount of support, and an area where we had seen previous resistance. That being the case, the market is likely to ask a lot of questions of itself and it is worth noting that the US dollar strengthening may partially be due to the fact that people are piling into bonds again. If that is going to be the case, then it does not make much sense that gold would rally in a safety trade.
On the other hand, if we were to break above the top of the shooting star for the trading session on Thursday, then it is likely that we could go looking towards the $1865 level, which is the top of the gap. Gaps do get filled eventually, and therefore it is likely that we will try to do that given enough time. On the other hand, if we can break above the gap, then it is likely that the market could go looking towards the $1920 level, which is the gateway to much higher pricing.
Pay attention to those Bond yields, because they are dropping in the United States and as long as that is going to continue to be the case, it is likely that we would see gold struggle. We have formed several shooting stars in a row, so I do think that we are running out of momentum, and we should continue to see selling on rallies and therefore I think it is only a matter of time before we drift lower, but I have to keep open to all possibilities at this point as gold does tend to be very volatile and of course the entire “risk on/risk off” attitude of the market is a very fluid situation currently.