Gold Forecast: Markets Pull Back to Supportive Zone

Christopher Lewis

The thing about gold is that it is very volatile, so you do not want to risk too much right away, as it makes sense to simply add to your position as it is proving itself to be correct.

Gold markets initially tried to rally on Friday but gave back some of the gains to dip just below the $1850 level. Nonetheless, we are still very much in the same consolidation area that we had been in for a while, so it makes sense that we continue to build a bit of a bullish flag. With that in mind, I still believe that the gold market has the possibility of going much higher, but that does not necessarily mean that we need to take off straight away. Gold does tend to be rather volatile and choppy at times, which is essentially what we are seeing right now.

As long as we can stay above the crucial $1835 level, believe that gold still has a way to go as far as the upside is concerned. By measuring the pole of the bullish flag, it does suggest that we could go to $2000 eventually, but that does not necessarily mean that it will be easy. After all, we have the US dollar surging higher overall, so that does provide a little bit of a drag to the gold market. However, you should pay more attention to the yields on the 10-year note than anything else, because if they cannot keep up with inflation figures in America, then gold should do fairly well. Currently, they are most decidedly lacking as the real yield is still negative.

If we do break down below the $1835 level, then I suspect that gold will probably drop towards the $1800 level. That is an area that has a lot of psychology built into it due to the fact that it is a large, round, significant big figure, but we also have the 200-day EMA hanging about in that area as well. While I do not see that is the most likely of scenarios, the reality is that it is a very real possibility. I suspect that this pullback will end up being a nice buying opportunity that you can take advantage of. The thing about gold is that it is very volatile, so you do not want to risk too much right away, as it makes sense to simply add to your position as it is proving itself to be correct.

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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