Gold Forecast: Likely to Continue Sideways Action

Christopher Lewis

I think the best trade at this point is going to be back and forth with small positions, at least until the market tells us that it wants to go in another direction.

Gold markets had a rather volatile Friday session as we bounced around to show signs of indecision. True, the candlestick was positive for the session, but we are still very much in the same range we have been in for a couple of weeks. The 50 day EMA currently sits just above and has just crossed below the 200 day EMA, but both of these moving averages are relatively flat so I do not necessarily think that we are going to see some type of massive move due to the potential “death cross.”

One thing that does catch my attention as far as the moving averages are concerned is the fact that they are sitting right at the $1800 level, which is a large, round, psychologically significant figure and will attract a lot of attention. As long as that is going to be the case, then I think there is a bit of a barrier above to keep this market down. The market breaking above the $1820 level does open up the possibility of a bigger move to the upside, I just do not see the momentum in this market currently to make that happen.

To the downside, I see the $1760 level as a potential support barrier and breaking down below that could send the markets much lower. At that point, I would anticipate that we would go looking towards the $1700 level. Gold is going to have problems going into the end of the year though, because there just will not be enough in the way of liquidity to make this market very mobile. However, if we get a sudden shock, it works both ways in the sense that the lack of liquidity could send this market much higher or lower, depending on the direction.

I think the best trade at this point is going to be back and forth with small positions, at least until the market tells us that it wants to go in another direction. That being said, this is a market that continues to see external influence in the form of interest rates in US dollars, so keep that in mind as well. If interest rates start to rally again, then you could see gold pay the price, and vice versa.

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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