You need to keep an eye on 10-year yields in America.
Gold markets gapped higher to kick off the trading session on Monday, only to pull back to fill that very same gap. We have recovered from there to go looking towards the $1825 level, which in and of itself probably does not mean much, but above there we have the $1835 level. The $1835 level would be a major barrier to overcome, and if the market did so, it could open up a huge uptrend for gold itself. A lot of this is going to be dictated by what goes on in the US dollar and of course the 10-year yield.
All of that being said, the market is a little over-extended, so I do not necessarily think that we have the ability to do it right now, but maybe a little bit of a pullback would be necessary. On the other hand, if we wiped out the massive Friday candlestick, that would be a very negative turn of events and could send this market towards the $1760 level, and then maybe even the $1725 level.
Gold markets have been very noisy as of late, and it is worth noting that the last couple of trading sessions have been extraordinarily bullish. In fact, this somewhat flies in the face of everything that we had seen previously, so I think you need to pay close attention to the fact that the momentum seems to be shifting in a way that does not mean that we can break out right away like I mentioned previously, but it does suggest that perhaps we are building the case for this to happen. Pay close attention to the US Dollar Index, and it has negative correlation to this market. More importantly though, you need to keep an eye on 10-year yields in America. If they continue to drop like they have over the last couple of days, that will more than likely have more money flowing into gold.
The 200-day EMA sits at the $1795 level, while the 50-day EMA sits $10 lower than that. I think that is an area that could catch any type of significant selloff, but for what it is worth, the candlestick for the session on Monday looks as if we are not necessarily ready to pull back quite yet either.