Gold Forecast: Pullback from Major Resistance Barrier

Christopher Lewis

Do not jump “all in” right away, but if we get that breakout above the highs of the Monday candlestick, I might get a little bit more aggressive.

Gold markets rallied quite nicely on Wednesday, but as you can see, we saw the $1830 level hold yet again. This is an area that has been important multiple times over the last four or five sessions, so the fact that it held does tell us something.

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What it tells me is that the market is not quite ready for the breakout, so I do think that we probably slipped right back into the consolidation overall, as we continue to see the 50 day EMA and the 200 day EMA hanging about the $1800 level. We have bounced from there after that nasty candlestick three sessions ago, but it should be noted that we also found resistance at the top of that nasty candlestick. Because of this, I think we are simply trying to build some type of base for consolidation, which does make quite a bit of sense considering that the jobs number comes out on Friday, and that will have a major influence on what happens with the greenback. Obviously, the greenback has a negative correlation most times against gold, and it is likely that the correlation should continue to hold. The jobs number obviously will have a major influence on what happens with the US dollar, and consequently, the gold market.

To the downside, if we break down below the moving averages and specifically the $1800 level, the likely that we will go looking towards the $1775 level, an area that has been supportive more than once. If we were to break down below there, then it is likely that this market will really start to fall apart. That would almost certainly include a US dollar that is spiking at the moment and could put quite a bit of downward pressure. Regardless, keep in mind that gold is trying to grind higher, but the keyword here of course is “grind.” Gold does tend to be choppy at best, and we have a lot of work to do to change the overall attitude. Can we rally from here? Of course we can, but that does not necessarily mean that it is going to be easy. Because of this, do not jump “all in” right away, but if we get that breakout above the highs of the Monday candlestick, I might get a little bit more aggressive.

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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