Gold Forecast: Same Nonsensical Trading Behavior

Christopher Lewis

The gold market will probably see a lot of continued chop, and then a massive, impulsive move that could catch people off guard.

The gold markets continue to chop back and forth, as nobody really has a grasp on what to do next. The market has been going back and forth around the 200-day EMA, which attracts a lot of technical trading. The 50-day EMA sits just above and is getting relatively close to forming a “death cross” which, while I do not follow that particular indicator myself, I know a lot of people who do. There will be a lot of algorithmic traders out there looking to get involved if and when this move happens.

To the upside, if we can clear the high of last week, then I think the market is likely to go to the upside and fill the gap that extends all the way to the $1860 level. That is an area where we had seen a bit of selling pressure, and blowing through it would be a good sign as the market could go looking towards the $1915 level. Above there, the market is likely to continue going higher in order to reach towards the $2100 level which was the recent all-time high.

To the downside, if we were to break down below the lows of the Monday session, then I think it is very likely that the gold market could go looking towards $1750 level. The $1750 level is an area that previously has not only been supportive, but we have also seen resistance at that point as well. If we break down below there, then it is likely that the market could go looking towards the double bottom underneath at the $1680 handle. If we were to break down below that double bottom, then it opens up the possibility of the gold market reaching towards the $1500 level. It is a bit of a stretch at this point, but with the way the US dollar has been acting lately, it is not necessarily an impossibility.

One thing I think you can probably count on is the fact that this is a market that will continue to be moving based upon external influences more than anything else, so you should be cautious about your position size, as the gold market will probably see a lot of continued chop, and then a massive, impulsive move that could catch people off guard.

Gold

Christopher Lewis

Christopher Lewis has been trading Forex for several years. He writes about Forex for many online publications, including his own site, aptly named The Trader Guy.

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