Gold markets gapped lower to kick off the trading session on Monday, turned around to fill that gap, only to fall again. Gold looks as if it has carved out the top of its trading range heading into the holidays, and now seems to be likely to drift a bit lower. I am not calling for some type of massive sell off, just that I think we had gotten a little too far ahead of ourselves.
When you look at this chart, you can see that the 50 day EMA and the 200 day EMA are both slicing through the candlestick for the session on Monday and are relatively flat. That suggests to me that perhaps we are not ready to go anywhere for the time being, and that makes quite a bit of sense considering that the liquidity will be a major issue over the next two weeks, as people are focused more on holidays than trading. Beyond that, with the lack of liquidity, it is going to take something happening to jump the market one way or the other. If we were to get some type of sudden news, that could send this market skyrocketing or plunging, due to the fact that there will not be as many people involved. It is because of this that I would keep any position relatively small.
To the upside, I see the $1810 area as resistance, and the $1760 level underneath as being rather supportive. Ultimately, this is a market that will continue to be noisy in general, but I think we will probably have more downside than up at the moment. That being said, this is a situation where we are probably trying to carve out some type of comfortable trading range after plunging, and for what it is worth we seem a bit confused to say the least. The US dollar strengthening certainly will not do any favors for the gold market, as well as the interest rate situation that seems to be fluid at best. In general, this is a market that I think is looking for clarity, but I do not think we will get it between now and the end of the year. As long as that is going to be the case, then I will trade it as a range-bound market, but I will do so with small positions.
