Gold markets gapped higher to kick off the trading session on Tuesday as traders came back from the Independence Day extended weekend, and then sent gold all the way to the 50-day EMA near the $1816 level. However, we have seen a lot of strength in the US dollar, and as a result, the gold market sold off quite drastically in order to form a massive shooting star. I believe this tells us just how difficult it is going to be for gold to continue going higher, and it looks as if the $1800 level has held as resistance by the time we got towards the end of the day.
It is very likely that we will continue to face a lot of pressure on these rallies, as the US dollar seems to be strengthening against almost everything. Earlier in the day at the click, gold finally found enough momentum to take off and perhaps fill the massive gap above. That would signal that the market could go all the way to the $1860 level, but things have gotten so bearish since then that I believe the market is in significant trouble overall.
Underneath, you can see the $1750 level is an area that has been important recently, and I think that is your next major support level on any type of significant pullback. If we were to somehow break down below there, then the market could open up a move towards the double bottom at the $1680 level, but I think it would take quite a bit of selling pressure to make that happen as well. Nonetheless, the onus is still on the buyers, especially after giving up the gains like they did during the trading session on Tuesday.
Bonds got hit during the trading session, with the 10-year note dropping down to 1.37%, showing that most traders had preferred to jump into the bond markets instead of buying gold. That is not a good sign, so I think we continue to struggle to hang on to gains for any significant move. This will be especially true if long-term inflation expectations continue to dwindle, which could be what we are seeing based upon the break evens and of course the 10-year note as mentioned previously.
