Gold Forecast: Markets Give Up Gains After Gapping Lower

Christopher Lewis

Expect a lot of shuffle, but at the end of the day I think we will probably end up in the same general vicinity we are right now.

Gold markets gapped lower to kick off the trading session on Tuesday, but then turned around to reach towards the 200 day EMA above. That is an area where a lot of people will be paying close attention to, as it is a commonly used technical indicator. Furthermore, there is resistance above there in the form of the $1820 level, where we have already failed at a couple of times.

Keep in mind this time of year liquidity becomes a serious issue so I would not read too much into the moves when it comes to gold, as it is a relatively thin market most of the time anyway. At this point, it looks to me like we are going to probably continue to drift lower, with short-term rallies offering selling opportunities. Whether or not it is going to be a big move is a completely different question, with perhaps the $1760 level underneath offering massive support, as it has been tested multiple times previously. This time of year, I do not expect the market to break out of this range, so I think that even if we do get a little bit of momentum to the downside, that is probably about as far as we go.

If we do turn around and break above the $1820 level, it would obviously be a very bullish sign, perhaps opening up the possibility of $1850 rather quickly. That could happen in the event of a serious lack of liquidity and some type of big position started or may be a headline crossing the newswires. That being said, you can also say the same thing about a breakdown, slicing through the $1750 level, opening up a move down to the $1725 level. I do not expect that to happen, but I have learned many years ago that this time of year you do not want to put huge positions on, just because of the fact that the markets can be very erratic. With that in mind, keep your position size relatively small, in order to avoid any type of nasty surprise this time a year. Traders are trying to figure out where they want to be at the beginning of next year and closing positions for this year to report to clients. Expect a lot of shuffle, but at the end of the day I think we will probably end up in the same general vicinity we are right now.

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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