Gold markets rallied quite nicely on Tuesday, bouncing from the 50-day EMA to show signs of life again. It was a decent move, and wiped out about half of the losses of the previous session. That being said, nasty candlesticks like we saw for Monday very rarely happen in any type of vacuum, so one would think that the sellers will return sooner rather than later. The moving averages, both the 50 and the 200 day, are sitting right around the $1800 level, so it is worth paying close attention to all of that. If we were to break down below that general vicinity, that could open up fresh selling.
I suspect that the next couple of days could be very noisy and perhaps even trade within the range of the massive red candlestick from Monday. This is simply because we have the jobs number coming out on Friday and that could have an effect on the greenback, which has its effect on the gold market as many of you know.
What I find particularly interesting is that yields in America are rising at the same time as gold during the day, which is typically something that you do not see often. However, the market is clearly looking for some type of directionality, as the volatility seems to be picking up. The noisy behavior that we see typically precedes some type of bigger move, especially as volatility itself dictates. To the downside, if we were to break through these moving averages, we could go looking towards the $1775 level underneath. A breakdown below that level then opens up the “trapdoor to lower prices”, as it is very likely that we could go looking towards $1760 level.
On the other hand, if we were to turn around and take out the top of the Monday candlestick, then it is very possible we could go looking towards the $1875 level above, which is where we had peaked previously. We are about to get a big move, but the next couple of days may be more or less chop than anything else, so you should position size your trades accordingly. If you are a short-term trader, you may see quite a few scalping opportunities over the next couple of sessions.
