The gold markets have gone back and forth during the trading session on Thursday, as we slammed into the major downtrend line that I have drawn on the chart. Furthermore, we also have the 200 day EMA just above and of course the $1805 level as well. That is an area that I think will help define where this market is going to go over the longer term, so I have a lot of interest in that region.
When you look at the candlestick for the session, it makes a bit of an argument for a shooting star, or at the very least a neutral candlestick after an impulsive one to the upside. In other words, we are running out of momentum and therefore it is worth paying attention to. If we break down below the bottom of the candlestick for the day on Thursday, that could have this market selling off to continue the overall downtrend that we have been in. Yes, gold has rallied over the last couple of weeks in general, but we are still very much in a descending type of market.
As you can see, there is a major downtrend line, but there is also the 200 day EMA sitting above as well. In other words, I think through all of these indicators, there is a serious lack of momentum in this market. If we were to break above the $1805 level, then we could go looking towards $1835 level. Clearing that would allow this to be more or less a “buy-and-hold” type of market that would indicate a major change in attitude and trend.
While the US dollar has been selling off, the reality is that interest rates in America are rising, meaning that it is easier to get a return through interest rates that it is to pay for storage of gold. Granted, whether or not it is a real return is a completely different question when you take inflation into account. Nonetheless, you should not buy gold just because of inflation, because it comes down to where interest rates are, and perhaps more importantly where they are heading. The candlestick is of course neutral but showing signs of exhaustion, and that is probably something that you should keep in mind to begin with.
