Gold Forecast: Gold Markets Continue Sideways Grinding

Christopher Lewis

Playing short-term back-and-forth type of positions with maybe half of your normal size could pan out quite well.

Gold markets have gone back and forth during the course of the trading session on Thursday as it seems like we do not have anywhere to be. With this being the case, I think that we are settling into a bit of a range as we head into the end of the year, especially as liquidity starts to disappear later in the month. The closer we get towards New Year’s Eve, the more likely we are to see a lot of hesitation for bigger position sizing. The lack of liquidity can also cause major spikes in both directions, so keep an eye on your position size, because if something goes wrong and suddenly spikes, it seems as if it is Murphy’s Law that it is almost always against you.

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I believe at this point we will probably continue to see a lot of noisy behavior, with the $1820 level above being the top of the consolidation area, while the $1765 level will be the bottom of consolidation. The market is probably going to go looking towards the edges of this consolidation area multiple times over the next couple of weeks, so if you are a range bound trader this might be the type of situation you look for. However, with the significant amount of liquidity issues that we will have over the next couple weeks, I would not get overly aggressive with my size. I think playing short-term back-and-forth type of positions with maybe half of your normal size could pan out quite well.

That being said, if we break down below the $1765 level, then I think we could go looking to the $1750 level, followed by the 1007 and $25 level. To the upside, the $1820 level being broken out of opens up the possibility of going all the way up to the $1875 region. With all of that, the one thing that I can say is that the market certainly seems to favor the downside overall, as you can see by the massive amount of wicks that have formed over the last couple of weeks every time we have tried to rally. Furthermore, we have the 50 day EMA and the 200 day EMA both sitting above that could cause some issues as well.

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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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