The gold markets broke down significantly on Tuesday as we have broken down below the 200-day EMA quite significantly. Furthermore, it looks as if we are closing towards the bottom of the overall range, which typically means that we have more downward pressure, just as we had seen at the end of the day on Monday. We are bit oversold in the short term, so I would not be surprised at all to see the gold market bounce a bit. If it does, then I will be looking for signs of exhaustion on shorter-term charts in order to start selling gold again. At that point, I would put on a position and then simply add as it proves itself to be a profitable trade.
The market has fallen towards a trendline that I have drawn on the chart, as we had touched that four times now. If we break down below the uptrend line, then it is likely that we will go much lower. I think that some type of bounce needs to be had in order to start shorting. I would love to see a bounce on the short-term chart that I can take advantage of, because gold has clearly shown itself to be extraordinarily negative and weak, but I think that it is only a matter of time before we have to decide whether or not we are going to continue to fall from here. However, that does not necessarily mean that we need to do it in one move. This trend line will be crucial, but at the end of the day we have seen so much selling that I do not necessarily think that we are going to continue to straight down, but obviously the momentum has shifted to the sellers, so you cannot argue with that.
Pay close attention to the 10-year yields, because if they suddenly spike, that will be like a death knell for gold. Furthermore, you need to pay close attention to the US dollar, because if that suddenly loses a lot of strength, that might help gold. Nonetheless, we have clearly seen a shift in the attitude, so it is just a matter of selling once we get an opportunity to do so. Right now, I think it is a little stretched.
