The gold market initially tried to rally just a bit on Tuesday but gave back the gains to fall during most of the day. The market closed at the very bottom, which is a very negative sign. That being said, the 50-day EMA sits just below and could offer a certain amount of support. If we break down below that level, we could go looking towards the $1750 level underneath, and then possibly even the $1725 level.
When you look at this chart, you can also see that the 200-day EMA sits just above, right along with the $1800 level which has a certain amount of psychology attached to it. The market breaking above the $1800 level does not mean much though, at least not until we break above the $1810 level. It is at that point where I might be convinced of a significant attempt to break out. The next level resistance would be at the $1835 level, which is a huge area of resistance that we have struggled with for a while. If we were to break above there, then gold would become more “buy-and-hold.”
If we break down below the lows of the trading session on Friday, then I think the gold market has the ability to break down quite significantly. At that point, I might become a little bit more aggressive to the downside, but I would also be paying close attention to the 10-year yield, because as yields rise, it tends to work against the value of gold in general. With that being the case, as you trade the gold market, you need to pay close attention to that market. Furthermore, we also have the US dollar that you have to pay attention to by extension, so keep an eye on the US Dollar Index as well. It does tend to have a longer-term negative correlation to this market, so you cannot necessarily expect to see the overall correlation change anytime soon. Because of this, you have to pay attention to all of these moving pieces, and then simply watch price action. At this point, we are simply going sideways in a relatively tight range, and despite the fact that we fell on Tuesday, not much has changed at this point.